16-18 Year Old Business Founders

[Ozzy]

Hi Folks,
I'm trying to do some research into the reasons behind why each year around 2,000 young people aged 16 to 17 years old choose to register self-employed rather than go onto an apprenticeship or remain in education. This is related to National Career Development month in November.

There is likely to be more who don't register, but HMRC record around 2,000 a year who register with them as self employed. So if anyone knows someone in this age bracket or was this age when they started their own business (in recent years) please get in touch.

 

[Mark T Jones]

I wonder how many of those are meaningful businesses?

In my teen most of us would go out and do stuff that would now qualify as business or even - God forbid - 'entrepreneurial' - Washing cars, cleaning windows, buying & selling (I remember a successful Christmas stint selling mistletoe door-to-door)

We never did anything as vulgar as registering business, keeping books or paying tax, obviously.

 

[Ozzy]

We never did anything as vulgar as registering business, keeping books or paying tax, obviously.

That's where my interest is; my logic being that any cash-in-hand quick bucks would not have registered themselves with HMRC so won't be included in these numbers.
These are individuals who have taken the step to register with HMRC, and based on the FOI data we obtained, have also filed at least one complete SA return. So more likely to be at least working towards meaningful business.

 

[Anthony Phillips]

Just thinking out loud , being an 'Entrepreneur' and running your own business in recent years has become alot more cool and fashionable, pushed on by the usual suspects like Dragons Den, Shark Tank etc.

It's interesting the number that have registered for HMRC, is it possible that peers/parents are guiding them to 'do it right' from the beginning, is there an element of some parents trading or owning properties and channeling income through them to offset tax liabilities?

On graduating my daughter immediately went into self employment , as this is how her 'employer' operates, so maybe there is something to say in the way that companies operate now, it certainly is easier to have 'contractors' than employees. I have a mix of both employees and contractors.

25% of our clients are in the 18-35yr old bracket, we do however get alot of queries from the younger than 18 bracket, but we do not work with those.

I have been asked to present to under 18s Business Students before, as well as graduates, so I can only assume that age group are now more switched on to working for themselves, and hopefully getting some better education in how to than I have seen previously in mainstream education (small dig there).

 

[IanSuth]

That's where my interest is; my logic being that any cash-in-hand quick bucks would not have registered themselves with HMRC so won't be included in these numbers.
These are individuals who have taken the step to register with HMRC, and based on the FOI data we obtained, have also filed at least one complete SA return. So more likely to be at least working towards meaningful business.

My son was at a school with a bunch of really talented musicians, they were registerred as businesses for the purposes of paid performance (from classical session work to voiceovers)- it would be interesting to see how many of those 2000 are psc's of those in the creative industries

 

[Ozzy]

as this is how her 'employer' operates

it would be interesting to see how many of those 2000 are psc's of those in the creative industries

It's some of this sort of information I'm hoping to get to the root of. My own daughter registered self employed at the age of 16 for a similar reason. She was over qualified for any available apprenticeships and despite some businesses willing to employ her they legally were not allowed, unless she registered self employed and they took her on as a contractor as a bit of a "loophole".

 

[Newchodge]

On graduating my daughter immediately went into self employment , as this is how her 'employer' operates,

What, illegally?

 

[Anthony Phillips]

No not at all, it's just they were paying their staff as contractors rather than PAYE, she actually has now been taken on by them on PAYE.

I think certainly alot of smaller and startup operate this way rather than dealing with payroll etc in the beginning.

What, illegally?

 

[Mark T Jones]

What, illegally?

This is a valid point - the so-called 'gig economy' certainly supports some very dubious 'employment' environments.

 

[Newchodge]

No not at all, it's just they were paying their staff as contractors rather than PAYE, she actually has now been taken on by them on PAYE.

I think certainly alot of smaller and startup operate this way rather than dealing with payroll etc in the beginning.

That is illegal.

EDIT to explain: An employer does not have the right to decide whether their employee is a contractor or an employee, that is a matter of law. Treating an employee as a contractor means cheating the employee of their employment rights and the exchequer of the National insurance payments due from the employer. Whichis illegal.

 

[Anthony Phillips]

Can you please clarify in what way, are you referring to IR35?

That is illegal.

 

[Newchodge]

Can you please clarify in what way, are you referring to IR35?

I edited as above. Nothing to do with IR35, everything to do with the legal relationship between employee and employer.

 

[Anthony Phillips]

Ah yes, I see your point.

I edited as above. Nothing to do with IR35, everything to do with the legal relationship between employee and employer.

 

[Ozzy]

I edited as above. Nothing to do with IR35, everything to do with the legal relationship between employee and employer.

I assume in my daughters scenario, as they could not employ her at all (no trainee/apprenticeship options available) then no law has been broken?

 

[Newchodge]

I assume in my daughters scenario, as they could not employ her at all (no trainee/apprenticeship options available) then no law has been broken?

Were 'they' giving her work to do? Why were they not 'allowed' to employ her?

 

[Ozzy]

Why were they not 'allowed' to employ her?

Some context, she was home schooled and completed her GCSE's and subsequent industry related exams before she was 16. No point going to college as she'd already pass the exams that college offered. The only apprenticeship on offer in her industry she'd already passed the exam for. So these ruled out her going to college and ruled out her doing an apprenticeship.
A handful of potential employers expressed an interest to employ her but because she was under 18, and also unable to do the apprenticeships on offer working towards a qualification, they could not.
(In the end registering self employed she now works for three of them freelance at a much higher hourly rate, so was to her advantage, but that isn't the point really)

 

[Newchodge]

Some context, she was home schooled and completed her GCSE's and subsequent industry related exams before she was 16. No point going to college as she'd already pass the exams that college offered. The only apprenticeship on offer in her industry she'd already passed the exam for. So these ruled out her going to college and ruled out her doing an apprenticeship.
A handful of potential employers expressed an interest to employ her but because she was under 18, and also unable to do the apprenticeships on offer working towards a qualification, they could not.
(In the end registering self employed she now works for three of them freelance at a much higher hourly rate, so was to her advantage, but that isn't the point really)

The guidance does state that self employment for 16-18 year olds should be treated exactly the same way as employment, so they were still breaking the rules! While also benefitting from not giving employment rights or NI payments (or training).

Have you calculated the 'much higher hourly rate' to take into account the loss of paid holidays, sickness absence, employment rights etc?

 

[IanSuth]

The guidance does state that self employment for 16-18 year olds should be treated exactly the same way as employment, so they were still breaking the rules! While also benefitting from not giving employment rights or NI payments (or training).

Have you calculated the 'much higher hourly rate' to take into account the loss of paid holidays, sickness absence, employment rights etc?

There is also law that companies can only employ 16-18 yo's full time if they ensure they attend 280 hours per year of college education which was put in place sensibly to ensure no exploitation of minors but doesnt help those who dont need the education element and where there is no sensible "training" as the providers are not set up to train at the level needed to under 18's as they expect people to be in college doing the base level training until that age

This is due to the age of participation in education being raised from 16 to 18 - https://assets.publishing.service.g...eople-in-education-employment-or-training.pdf

 

[Ozzy]

Firstly are you interested in providing an expert comment on this if I can get enough data together for some UKBF PR about this next month?

The guidance does state that self employment for 16-18 year olds should be treated exactly the same way as employment, so they were still breaking the rules!

I think I may be missing something, because if an employer is not allowed to employ someone (except in an education capacity as part of a recognised route to a qualification - such as apprenticeship) how can they employ someone full time under the age of 18?
Adding full time as the main thing here actually, we're not talking part time on the side jobs.

Have you calculated the 'much higher hourly rate' to take into account the loss of paid holidays, sickness absence, employment rights etc?

I'd say it's balanced in her favour, but irrespective she's happy she's doing what she is now with a broad range of different clients she can pick and choose from.

There is also law that companies can only employ 16-18 yo's full time if they ensure they attend 280 hours per year of college education

Just before I hit Post @IanSuth added this comment which is what I was getting at. I agree it's sensible in many ways but I have a feeling there must be some that fall through the cracks.

 

[Newchodge]

I think I may be missing something, because if an employer is not allowed to employ someone (except in an education capacity as part of a recognised route to a qualification - such as apprenticeship) how can they employ someone full time under the age of 18?
Adding full time as the main thing here actually, we're not talking part time on the side jobs.

An employer can employ a 16 year old full time as long as they are also getting 280 hours of education. That is what applies to self employed 16 year olds as well.

 

[Newchodge]

Firstly are you interested in providing an expert comment on this if I can get enough data together for some UKBF PR about this next month?

I think I would be happy to do something on disguised employment, but I don't have enough understanding of the 16-18 year old issues.

 

[IanSuth]

Firstly are you interested in providing an expert comment on this if I can get enough data together for some UKBF PR about this next month?

I think I may be missing something, because if an employer is not allowed to employ someone (except in an education capacity as part of a recognised route to a qualification - such as apprenticeship) how can they employ someone full time under the age of 18?
Adding full time as the main thing here actually, we're not talking part time on the side jobs.

I'd say it's balanced in her favour, but irrespective she's happy she's doing what she is now with a broad range of different clients she can pick and choose from.


Just before I hit Post @IanSuth added this comment which is what I was getting at. I agree it's sensible in many ways but I have a feeling there must be some that fall through the cracks.

Yes those like your daughter who have not follow the "standard" timeline of school to GCSE then if they have a vocation in mind some college or apprenticeship with training.

Like most big plans, they work for 99.9% but are a total hindrance for the .1%

 

[Newchodge]

Yes those like your daughter who have not follow the "standard" timeline of school to GCSE then if they have a vocation in mind some college or apprenticeship with training.

Like most big plans, they work for 99.9% but are a total hindrance for the .1%

Possibly, for someone home schooled, further 'home schooling' may be the answer?

 

[IanSuth]

An employer can employ a 16 year old full time as long as they are also getting 280 hours of education. That is what applies to self employed 16 year olds as well.

Yes but a self employed 16 yo can self certify that their company is providing them 280 hours of training without the end user employer having that hassle (basically your home schooling)

It is really a horrible fudge to get around a hard and fast rule that should instead allow discretion

 

[Ozzy]

An employer can employ a 16 year old full time as long as they are also getting 280 hours of education. That is what applies to self employed 16 year olds as well.

Ok I just had a huge Eruk moment.

Are you saying that if a young person chooses to register themselves as self employed and start their own business at the age of 16, they must also ensure they undertake 280 hours of education?
Who would be liable if they don't do that of their own choosing?

This is sole trader - not Limited company - although I imagine the rules may be the same

 

[Newchodge]

Yes but a self employed 16 yo can self certify that their company is providing them 280 hours of training without the end user employer having that hassle (basically your home schooling)

It is really a horrible fudge to get around a hard and fast rule that should instead allow discretion

What company? They are self-employed, not employed by their own limited.

 

[Newchodge]

Ok I just had a huge Eruk moment.

Are you saying that if a young person chooses to register themselves as self employed and start their own business at the age of 16, they must also ensure they undertake 280 hours of education?
Who would be liable if they don't do that of their own choosing?

This is sole trader - not Limited company - although I imagine the rules may be the same

Could I just point out that I am responding to this while at the samew time trying to do my book-keeping. my head was hurting enough before

 

[Ozzy]

my head was hurting enough before

Understood. I find it an interesting topic, so many variables. Even considering what their knowledge of what is involved in running the business at 16 years old would be, very limited.

Making an assumption that is the case, I wonder how many 16 and 17 year old would realise this about the training.

 

[bodgitt&scarperLTD]

I started self employment at 16 because my Dad said I should. I'm 33 now.

I also employed a 16 year old a couple of years ago for around a year befor he joined the army. We looked into the education requirement, and the only sanctions that we could see that could be enforced had to do with removal of child benefit from the parents of said child. Given that he had left a pretty ****ed up household to move down south to be with a girl he met, we reasoned that we were pretty safe. He no longer works for me, but nobody has come calling asking about his education.

 

[Newchodge]

Understood. I find it an interesting topic, so many variables. Even considering what their knowledge of what is involved in running the business at 16 years old would be, very limited.

Making an assumption that is the case, I wonder how many 16 and 17 year old would realise this about the training.

I think the issue is, probably, that we are conditioned to the idea of people being able to leave school at 16. I doubt you would have accepted the idea of your daughter not doing any learning after the age of 14? Yet most of us take umbrage at the idea of the same thing applying for a further 2 years. My parents left school at 14, I could have left at 15, these things move on.

 

[fisicx]

Bloke who does groundwork pays his 16yo son to work for him rather than go to college. I’ve just hung him up and he says his son is registered as self employed to be able to do just that. It seems to be used as a way to get round the education thing.

 

[IanSuth]

Bloke who does groundwork pays his 16yo son to work for him rather than go to college. I’ve just hung him up and he says his son is registered as self employed to be able to do just that. It seems to be used as a way to get round the education thing.

The other way would be he would be employed by his dad as an employee and have to be sent to college on day release to do an NVQ in construction skills or similar.

I think the self employed bit basically means as Newchodge says - there is no company to come and chase re the lack of training - although officially the local council has a statutory obligation to ensure it is happening so should be chasing someone

 

[fisicx]

The other way would be he would be employed by his dad as an employee and have to be sent to college on day release to do an NVQ in construction skills or similar.

Just seen him pushing a wheelbarrow. Not sure he's learning any skills.

 

[Ozzy]

I think the issue is, probably, that we are conditioned to the idea of people being able to leave school at 16. I doubt you would have accepted the idea of your daughter not doing any learning after the age of 14? Yet most of us take umbrage at the idea of the same thing applying for a further 2 years. My parents left school at 14, I could have left at 15, these things move on.

I get the social conditioning element; it shapes so much of society and generations have different expectations and perceptions.

The part I'm trying to get some understanding of is the impact of;
To register a Limited company and become a company director with the legal responsibilities that entails, the Companies Act requires you must be 16 or over.
To register as a self employed sole trader with some similar obligations around managing a business, you can do this from the age of 16.
To get a regular full time job you must be 18 or over.

You can get a regular job at the age of 16 if you register as self employed and then work for an "employer", especially through a PSC as a contractor.

Whether this was 14 and 16, 15 and 17, the issue would be the same...if there is an issue. I only have a small cohort of information hence asking the question here to gather a wider net.

 

[Deleted member 335660]

Hi Folks,
I'm trying to do some research into the reasons behind why each year around 2,000 young people aged 16 to 17 years old choose to register self-employed rather than go onto an apprenticeship or remain in education. This is related to National Career Development month in November.

There is likely to be more who don't register, but HMRC record around 2,000 a year who register with them as self employed. So if anyone knows someone in this age bracket or was this age when they started their own business (in recent years) please get in touch.

Hi Ozzy, I used to run an Entrepreneur Challenge at the University of Portsmouth and got involved with a group that ran similar things in Primary and Secondary Schools. Can’t remember the name but if you can research it you might find that helpful.

 

[Deleted member 59730]

I'm trying to do some research into the reasons behind why each year around 2,000 young people aged 16 to 17 years old choose to register self-employed

Many of those will be working in the family business and running a separate business to reduce VAT liability, Inheritance tax or other reasons. I've heard of farmers giving their children a couple of acres a year and never figured out why.

 

[Ozzy]

I've just got the past 4 years statistics on how many young people under the age of 18 started a Limited company; and it's around 6,000 a year on top of the circa 2,000 a year who register self employed. So that's circa 8,000 of full time education age starting their own business one way or another. That's quite a few I feel.

 

[fisicx]

Another reason could be student loans. You can set up a company to receive the loan from which you pay yourself dividends. Apparently it’s a tax efficient way of doing things.