Paying someone without an NI number

[Nord20]

Hi guys,

we have been operating for just under six months now, with our current staff all being self-employed (it is the nature of the business we're in - they all work for a number of different companies).

However, we have now taken on someone in a receptionist role who we need to be PAYE. The problem is that she is an American Student and so doesn't have an NI number yet (it has been applied for). I have done all the relevant checks, got copies of the relevant documents, so I know she is entitled to work for us.

My question is: can we pay her in advance of her getting her NI number, or do we have to wait for it to come through? My thinking is that it is going to be hard for me to work out tax codes and report this payment to HMRC at the end of the month is she doesn't have an NI number to go with it.

All thoughts much appreciated!

Thank you.

 

[Tom McClelland]

Hi guys,

we have been operating for just under six months now, with our current staff all being self-employed (it is the nature of the business we're in - they all work for a number of different companies).

However, we have now taken on someone in a receptionist role who we need to be PAYE. The problem is that she is an American Student and so doesn't have an NI number yet (it has been applied for). I have done all the relevant checks, got copies of the relevant documents, so I know she is entitled to work for us.

My question is: can we pay her in advance of her getting her NI number, or do we have to wait for it to come through? My thinking is that it is going to be hard for me to work out tax codes and report this payment to HMRC at the end of the month is she doesn't have an NI number to go with it.

All thoughts much appreciated!

Thank you.

She can fill in a P46 without an NI Number, which you can file electronically with HMRC using appropriate payroll software or the HMRC PAYE tools, or directly through the HMRC website. You can then pay her, again without an NI number. You can even file her end of year P14 return without an NI number.

You've done the important thing, which is to check her eligibility to work. You will need her birthday if you don't have her NI number as a P46 cannot be filed if you don't have one or the other.

 

[Chris Ashdown]

Make sure you have photocopies of all docs like passport and visa stating free to work in UK as you need to keep proof otherwise a £10,000 fine if they were not entitled

 

[MrPAYE]

Hi guys,

we have been operating for just under six months now, with our current staff all being self-employed (it is the nature of the business we're in - they all work for a number of different companies).

Slightly OT but be careful with this. For a start NEVER refer to self employed workers as your "staff" - this is music to HMRC's ears.

The fact that your workers work for other companies is normally a red herring in deciding their tax status with YOUR company. If I understand correctly you are in the health and fitness sector, so perhaps these workers are fitness instructors, possibly holding classes each day/week for your customers ?

Be very careful about getting the tax status correct for these workers. There are a couple of tax cases involving fitness/gym instructors which HMRC wheel out whenever the argument arises to support their view that there is an employer/employee relationship.

The facts will speak for themselves but thought I should warn you of the dangers in this area.

 

[Nord20]

Many thanks for your reply Tom - that is exactly the information I was after!

MrPAYE, I take your point and it is something we are constantly aware of. You are exactly right - those self-employed "people what sometimes do some work in our premises but are definitely not staff" are indeed teachers who come in to hold classes.

Our decision that they should rightfully be self employed is based on the following:

1. They all work at a number of different studios.

2. If they cannot make a particular class, they can arrange (or at least, we can) for someone else to take the class.

3. Teachers tend to be fairly transient beings, so any one teacher is quite likely to be with us for a maximum of 6 months to a year.

4. It is the industry standard - all of the other studios I know employ the same approach.

5. I have yet to meet a teacher who is happy to be PAYE.

In your opinion is there anything I can do to find out for certain whether we are kosher or not doing this? I am sure the hassle of making the teachers PAYE is certainly less than the hassle of having HMRC throw the book at us (although, to be honest, if we did have to employ all the teachers and pay NI and tax at source we would probably not be able to afford to employ them anyhow).

 

[talkinpeace]

Check with your instructors what information the big chains get from them !!

By the way, when the Poles were first arriving, so that Payroll software could cope with them right away, the standard format for a temporary NI number was
TN DD MM YY M ; using their date of birth.
Later on they had to switch to 9 digit numbers as there were guys with the same date of birth.
I dealt with a chap who had three NI numbers - CIS made a right pigs ear of that!
But for your one, at least it can be updated later

 

[MrPAYE]

Ok, in response to your numbered points:

1) Not necessarily relevant. You need to look at how they work for YOUR company.

2) In cases of genuine self employment, the WORKER should be arranging (and paying) a replacement not your company. Doing it your way suggests a high level of control by your company. This was a major factor in one of the tax cases I alluded to earlier.

3) Not helpful. Even a few days work in an employer/employee relationship must be paid under PAYE rules. The fact that the engagement lasts for a reasonable period of time could work against you.

4) Totally and utterly irrelevant. If I had a pound for every time I had heard this I would be a very rich man indeed. It could well be that the other studios you refer to are doing the tax side wrong as well. If I were you I would concentrate on your business and whether you are complying with the tax laws, forget everyone else.

5) Tough, it ain't there choice (or their risk). They either satisfy the conditions for self employment or they don't. They can't choose, neither can you as the engager. But if your company gets the tax side wrong, you will have to pay, not the workers.

The actual risk to your business, and whether there is scope to argue self employment for some/all of these guys or whether you will have to stick them on PAYE will depend on the facts, i.e. how you engage them, how the classes are run, the content of the classes, who manages the admin (payments, enrolment, etc), the specifics around replacements, the contractual arrangements, the payment terms, etc etc etc.

Your first step therefore is to consider the above, or ask someone else who knows more about it to look into the arrangements, and then take it from there.

Hope this helps.

 

[Tom McClelland]

Check with your instructors what information the big chains get from them !!

By the way, when the Poles were first arriving, so that Payroll software could cope with them right away, the standard format for a temporary NI number was
TN DD MM YY M ; using their date of birth.
Later on they had to switch to 9 digit numbers as there were guys with the same date of birth.
I dealt with a chap who had three NI numbers - CIS made a right pigs ear of that!
But for your one, at least it can be updated later

Payroll software which accepts temporary format NI numbers (eg "TN dd mm yy M") fails HMRC accreditation, as these should *not* be used. Likewise 9 digits is not acceptable to HMRC under any circumstances. HMRC are quite explicit about this; if someone's NI number is not known it should be left blank.

 

[talkinpeace]

Tom,
That may be what HMRC say, but as they issued the NI numbers, CIS cards and tax returns with those details on I speak only from experience

 

[Tom McClelland]

Tom,
That may be what HMRC say, but as they issued the NI numbers, CIS cards and tax returns with those details on I speak only from experience

At one time they were allowed (even encouraged), but that was several years ago now, at least. Now they're forbidden.

http://www.hmrc.gov.uk/manuals/nimmanual/nim39110.htm