Self employment: realised I am a "disguised employee"

[iworth]

I am a student and have been volunteering with a small organisation since last April. I impressed them with the voluntary work that I did so much so that they offered me a freelance position with them for 16 hours a week at a rate of £10 per hour. They said I would have to register as self-employed because they have no paid employees and it would be too much hassle them setting up a payroll for one employee who only works part-time. I agreed but I have since looked into it and I am what HMRC would consider a “disguised” employee.

I am now concerned because I have been reading into it and this could be considered tax evasion. At first it sounded like the worst that could happen is the organisation would be chased up to match my National Insurance contributions but I am worried worse could happen.

I have registered as self-employed with HMRC and checked the box that said something along the lines of “I am only working for one company” so they must have concluded, or will eventually conclude when I send my tax return, that I am an employee. I have worked one month for the organisation and received a payment of £320 but that is it.

To get out of this pickle can I just say to the organisation that I no longer wish to work for them this way as I have read it could lead to a penalty from HMRC for tax evasion and they could be taken to court. From looking into it, it is just as much hassle for the organisation to register as an employer as it was for me to register as self-employed. I feel a bit screwed over to be honest as they made it sound as though it would be a big deal for them to register as an employer.

After ceasing to work for the organisation, should I send my tax return of £320 to HMRC and be completely truthful by declaring that only one organisation was responsible for paying me. Also, would they even care as it’s only £320 and I am going to pay the tax on it? I imagine it will be worse if I continue working this way and getting paid.

My concern is that if the organisation register as an employer and employ me that HMRC could find that weird and it could result in further issues for me.

If I do what I have proposed, will it even matter that I worked for only one company during a 1 month period to earn £320? Surely that's better than not declaring it?

Also: I will never earn about the ~£11k threshold working this job so there won't be any tax to evade - right?

 

[Mr D]

Your employer is avoiding employers NI, pension payments (though you probably are too low paid for that), holiday pay, sick pay and basically you having many rights.

They also cannot treat self employed the same as employees. Control is usually exerted on employees to be in work at particular times, even to attend work themselves rather than send someone else.

 

[iworth]

Your employer is avoiding employers NI, pension payments (though you probably are too low paid for that), holiday pay, sick pay and basically you having many rights.

They also cannot treat self employed the same as employees. Control is usually exerted on employees to be in work at particular times, even to attend work themselves rather than send someone else.

It sounds like they are doing it to skip that!

I work 16 hours a week but can do it whenever I like. So 4 hours x 4 days or weird hours across 2 days.

Do I need to cancel my self employment status and get them to set up as PAYE?

 

[Newchodge]

Are you still working there? If so, sit down with the manager and explain that you think they may be inadvertently breaking the law. Explain that you are clearly not self employed, and that you will be notifying HMRC of that fact, as you are not prepared to break the law.

HMRC won't care. for this level.

 

[estwig]

Depends if you want the job and want a reference.

How do you think they will take it, if you tell them you think they are breaking the law, and your going to report them to HMRC?

If you don't like it, look for another job, a few more weeks, a month or two even whilst you are looking, isn't going to make any difference.

 

[paulears]

Their claim about one part-time employee not being worth doing is also wrong. I am self-employed and work on specific events, but this means I have other self-employed people who invoice me (because they genuinely are) BUT we also have a few people who are hourly paid, and do perhaps 12 hours a week for maybe 6 weeks - my client happily takes these people on as PAYE, does the paperwork, and then while I set their working times and what they do - they get the accrued holiday pay and other benefits of PAYE employment. Sometimes, I take them on and they are useless and after maybe two days, I don't have them back - this is no big deal. I just tell the office they won't be back and that is that. Your example just smacks of either total ignorance, or deliberate intent to defraud.

 

[Mr D]

It sounds like they are doing it to skip that!

I work 16 hours a week but can do it whenever I like. So 4 hours x 4 days or weird hours across 2 days.

Do I need to cancel my self employment status and get them to set up as PAYE?

At the very least they are acting like the BBC were seen to do and trying to avoid responsibilities.

Too much hassle setting up a payroll for one employee? There are companies who will do payroll for them. Too much hassle paying the right taxes and providing the right benefits perhaps.

It should be more expensive than now for them to have you as an employee. National insurance, pay rises, holidays, sickness etc.
And you would be liable for your own holiday pay, your own NI, your own pension payment if you were self employed - and you'd bill them appropriately.

 

[estwig]

What's the matter with you people?

We are talking about a student, who did some voluntary work for a couple of months and now has the opportunity to make £10 ph for 16 hours a week, all because they made the effort.

It's hardly crime of the century!

Why don't you try a little positive encouragement, instead of pouring doom and gloom all over this.

 

[iworth]

Are you still working there? If so, sit down with the manager and explain that you think they may be inadvertently breaking the law. Explain that you are clearly not self employed, and that you will be notifying HMRC of that fact, as you are not prepared to break the law.

HMRC won't care. for this level.

That’s what I’m going to do but tell them it’s in everyone’s best interests tostop the current arrangement.

Depends if you want the job and want a reference.

How do you think they will take it, if you tell them you think they are breaking the law, and your going to report them to HMRC?

If you don't like it, look for another job, a few more weeks, a month or two even whilst you are looking, isn't going to make any difference.

I’m not going to say I’m going to report them but that if this continues HMRC will find out

Their claim about one part-time employee not being worth doing is also wrong. I am self-employed and work on specific events, but this means I have other self-employed people who invoice me (because they genuinely are) BUT we also have a few people who are hourly paid, and do perhaps 12 hours a week for maybe 6 weeks - my client happily takes these people on as PAYE, does the paperwork, and then while I set their working times and what they do - they get the accrued holiday pay and other benefits of PAYE employment. Sometimes, I take them on and they are useless and after maybe two days, I don't have them back - this is no big deal. I just tell the office they won't be back and that is that. Your example just smacks of either total ignorance, or deliberate intent to defraud.

I think they had a bad experience of PAYE last time they employed someone which was in the 90s. They said it was hassle but now it is much simpler

At the very least they are acting like the BBC were seen to do and trying to avoid responsibilities.

Too much hassle setting up a payroll for one employee? There are companies who will do payroll for them. Too much hassle paying the right taxes and providing the right benefits perhaps.

It should be more expensive than now for them to have you as an employee. National insurance, pay rises, holidays, sickness etc.
And you would be liable for your own holiday pay, your own NI, your own pension payment if you were self employed - and you'd bill them appropriately.

I will be under pension threshold, and only working there till next june roughly so no need to give frequeny payrises. They would have to pay NI ultimately if they continue this

 

[Newchodge]

That’s what I’m going to do but tell them it’s in everyone’s best interests tostop the current arrangement.



I’m not going to say I’m going to report them but that if this continues HMRC will find out



I think they had a bad experience of PAYE last time they employed someone which was in the 90s. They said it was hassle but now it is much simpler



I will be under pension threshold, and only working there till next june roughly so no need to give frequeny payrises. They would have to pay NI ultimately if they continue this

They won't have to pay NI as they will be under the £3,000 NI allowance and, anyway, you will be below the contribution threshold. The major thing you miss (apart from paid holiday) is pension credit for your state pension. Assuming we still have one! If they are worried about getting payroll or employment law wrong they can seek to outsource it, It's not expensive.

 

[iworth]

They won't have to pay NI as they will be under the £3,000 NI allowance and, anyway, you will be below the contribution threshold. The major thing you miss (apart from paid holiday) is pension credit for your state pension. Assuming we still have one! If they are worried about getting payroll or employment law wrong they can seek to outsource it, It's not expensive.

Not even if I earn over £7k which is around the figure I will have by the time I leave.

I think they will set up as PAYE. I have been doing really good work for them and they have been really thankful for it. I think part of setting me up as self employed was to see if I continued to be effective and reliable. Now I have proventhat I think I will have a better chance.

This thread can be deleted now if you know how to do that. Have enough input thanks.

 

[Noah]

This thread can be deleted now if you know how to do that. Have enough input thanks.

Not how things are done here (to the best of my knowledge) - left for posterity and education of others in a similar situation.

And a good thing too - this thread has been a model of question-answer-positive outcome. Compliments to all.

 

[SteveHa]

To the OP, you are not culpable in this, your employer is. If HMRC start asking questions, it's them that will be hit, not you. Provided you maintain your responsibilities on the basis of self-employed, you have nothing to worry about.

However, there are other considerations that you should think about, such as SSP, Parenting pay, paid holidays, employment protection etc. none of which you have in your current situation.

 

[Newchodge]

Not even if I earn over £7k which is around the figure I will have by the time I leave.

No, NI starts being payable @ £702 per month or £162 per week, and even then they don't have to pay the first £3,000 they would have to have paid without the NI allowance.

 

[Nochexman]

They said I would have to register as self-employed because they have no paid employees and it would be too much hassle them setting up a payroll for one employee who only works part-time.

If you are as smart as you appear you could offer to do the necessary paperwork for the charity so that they could employ you correctly. Doing that would make them more legitimate and potentially open the doors to them employing more people. And good experience for you.

 

[AlexMDS]

This is the future of employment I think. The amount of companies I know doing this is unreal.
My Accountant recommended it to me for any staff I would like to bring in

 

[Newchodge]

This is the future of employment I think.

Actually the whole point of it is that it isn't employment. It is also fraud. As far as I can establish, every case that has gone to court has gone in favour of the employees. Did you ask your accountant why he was encouraging fraud?

 

[AlexMDS]

Actually the whole point of it is that it isn't employment. It is also fraud. As far as I can establish, every case that has gone to court has gone in favour of the employees. Did you ask your accountant why he was encouraging fraud?

We dont have enough work to guarantee anyone so for me thats would be the best option.

Its just another scam for companies to get richer.

 

[Newchodge]

We dont have enough work to guarantee anyone so for me thats would be the best option.

Its just another scam for companies to get richer.

If you genuinely don't know week to week if you will have any work for someone, then offer a zero hours contract. If you know you have 5 hours per week but may have 15, offer a 5 hour contract with a requirement that they do x amount of overtime if available. There are perfectly legal ways round these problems that don 't rip off the employee.

 

[AlexMDS]

I don't like that idea of required overtime. Im just going to stick it out. I would rather run myself into the ground than that. When we can afford it we will bring someone in proper

 

[Mr D]

We dont have enough work to guarantee anyone so for me thats would be the best option.

Its just another scam for companies to get richer.

But the best option for you is then fiddling.
You don't decide what is best option for the business, your relationship with the person decides if they are self employed or not.
There was a case recently where a supposedly self employed bloke won multiple years of holiday pay from his old employer. Over £10k.

 

[Gecko001]

I am a student and have been volunteering with a small organisation since last April. I impressed them with the voluntary work that I did so much so that they offered me a freelance position with them for 16 hours a week at a rate of £10 per hour. They said I would have to register as self-employed because they have no paid employees and it would be too much hassle them setting up a payroll for one employee who only works part-time. I agreed but I have since looked into it and I am what HMRC would consider a “disguised” employee.

There is something fishy about this. Unless everybody in the charity is a volunteer including the people who run it, it is very likely that there are employees already and a payroll system set up.