'Self Employed' Staff

[Sphinx]

All my staff are classed as my employees. However when i look around at similar 'agency' employers I see many employers who use a loop hole and make their staff self employed.

At the end of the day this is mainly done so that they, as the employer do not have to pay 12.8% National insurance contributons on top of the employees wage.

My accountant has strongly advised me against doing this. Mainly because the inland revenue is currently investigating the businesses that run on this basis. If someone has been given work by the same company/person on a regular basis they cannot be classed as self employed, it dosent matter what forms the 'employee' has been made to sign.

They can go back 6 years plus interest fines. If the 'self employeed' employee has not bothered to make their own tax payments apparently the inland revenue don't waste time trying to track the employee, they are coming for the employers.

Any comments on this?

 

[deniser]

What your accountant says is absolutely right. These types of arrangements are scrutinised very carefully and it is the facts that count, not what it says on paper.

Moreover there is a presumption that no-one who has ever been an employee of a company can subsequently become self employed if still carrying out work for them - a presumption which is extremely hasrd to rebut.

 

[artona]

As to the second part of the previous post I am not sure. I once worked for a newspaper as staff and then carired on doing work for them when I went freelance. However I had lots of other customers as well.

As to the main topic I got myself into a situation where at one point I had 16 people working for us, all on a self employed basis. I phoned the tax office and asked if what I was doing was legal. The response was that there was no definative description of whether someone shuld be on an emplyed or self employed basis. If it ended up in court it would be decided then.

Logic said to me that the tax office would come after me, why should they chase lots of people if it was decided I should have been stopping tax etc so they all went onto the books bar one

 

[Jeewhizz]

Listen to your accountant - they are the expert (presumably!)

 

[recruit1]

I thought of using self-employed staff, but was advised against it from someone on this forum. I think you should get additional advise before you make a decision, I'm sure their's a way around it. You should speak to a business adviser or the HMRC themselves.

 

[Steve2507]

I wouldn't agree that your accountant is an expert on this, they deal with the money side of things, not legalities.

You should seek the advice of a lawyer specialising in employment.

However I feel that they should be classed as employees not self employed. Artonas point about himself is valid, until you get to the part of him having other customers. He is therefore no longer working for one company and having that company as his main source of income.

 

[Successful Selling]

The key principle is; whether you are an employee or self employed, this is not a choice, but instead dependant on the working arrangements between the individual and client (or employer).

There is a lot of information on the HMRC website about this.

Also, although this might directly not effect your situation, if you search 'IR35' on this forum, you will get plenty of information to read on the subject.

 

[Christophe]

'IR35' .

I had to fill 1 of these in when I was 'self employed' as a mortgage adviser. I was tied into the 1 broker, but the IR35 basically makes you say that you are NOT tied into any 1 scorce of income/company, otherwise you are deemed employed by that compan. Even if you are classed as self employed.


The company I 'worked' for got into a lot of trouble.... turns out they were cutting a lot of other corners as well.

 

[MyAccountantOnline]

I wouldn't agree that your accountant is an expert on this, they deal with the money side of things, not legalities.

You should seek the advice of a lawyer specialising in employment.

However I feel that they should be classed as employees not self employed. Artonas point about himself is valid, until you get to the part of him having other customers. He is therefore no longer working for one company and having that company as his main source of income.

As an accountant I can most definately say you SHOULD listen to your accountant!

Part of an accountants skills and expertise is knowing tax legislation this includes the tax law and rules surrounding how people are taxed. It is truly one of our fundamental areas of work

I should add that sadly I have seen it in practice ie where people dont listen to their accountants and engage the services of individuals claiming to be self employed to their cost.

 

[MyAccountantOnline]

All my staff are classed as my employees. However when i look around at similar 'agency' employers I see many employers who use a loop hole and make their staff self employed.

At the end of the day this is mainly done so that they, as the employer do not have to pay 12.8% National insurance contributons on top of the employees wage.

My accountant has strongly advised me against doing this. Mainly because the inland revenue is currently investigating the businesses that run on this basis. If someone has been given work by the same company/person on a regular basis they cannot be classed as self employed, it dosent matter what forms the 'employee' has been made to sign.

They can go back 6 years plus interest fines. If the 'self employeed' employee has not bothered to make their own tax payments apparently the inland revenue don't waste time trying to track the employee, they are coming for the employers.

Any comments on this?

Spinx what your accountant says is good advice - have a look at this as well -

http://www.hmrc.gov.uk/paye/employee-freelance.htm

 

[adventurelife]

I have both employed staff and self employed staff.

They self employed bid for each job that we put out. They work for many more companies than me so they are invoicing several companies. They are registered as self employed and pay their own tax and insurance. They have to provide all their own equipment and transport when working for us. They have to have insurance.

It is a difficult area and you should take legal advice and read the stuff on HMRC website in detail

 

[Sphinx]

Thanks for all the advice. I would always do the right thing, so I'm not going to consider this any more as an option. However it makes me feel like dobbing on all the companies i know who are doing this when they shouldnt (but i guess no one likes a tattle tale)

It gets annoying competing with other companies prices when they are an extra 12.8% better off than me on staff wages.

 

[Martin P]

Just to let you know, the domestic cleaning franchise Time For You, find cleaners for their clients, but the cleaners are all self employed. HMRC had a look into this and Time For You changed the way they run slightly. Now Time For You arrange a contract between the cleaner and the client and charge a fee to the client for doing it. It means that the franchisees have very little control over their cleaners now. The cleaners can change their hours, and negotiate their pay with the client; without talking to the franchisee. This is fine by HMRC but causes a lot of problems for the business