Using self employed workers and conforming with tax office

[Young Recruit]

Hi Accountants.

I have subcontracted work to people this year (not CIS) some of whom were Bulgarian and some were british.

For tax return purposes and to comply with law, when subcontracting work to people do I just put them under cost of sales and then job done or do I need documents from them?

Thanks in advance.

 

[Scalloway]

At the minimum they need to submit invoices. You also need to be sure that they are not disguised employees, as HMRC will charge you for NI and tax that should have been deducted if they fulfil the criteria for being employees.

 

[MyAccountantOnline]

Hi Accountants.

I have subcontracted work to people this year (not CIS) some of whom were Bulgarian and some were british.

For tax return purposes and to comply with law, when subcontracting work to people do I just put them under cost of sales and then job done or do I need documents from them?

Thanks in advance.

Why do you feel that they are self employed as opposed to employed?

 

[Young Recruit]

Why do you feel that they are self employed as opposed to employed?

I have used them once or twice a week at most.
They subcontract for other businesses
They turn down work from me

Ermm!!

 

[MyAccountantOnline]

I have used them once or twice a week at most.
They subcontract for other businesses
They turn down work from me

Ermm!!

Unfortunately that in itself doesn't make them self employed.

Just because someone says they are self employed, or works on a self employed basis for other businesses, doesn't necessarily make them self employed when they undertake work for you.

You have to consider several factors and decide based on the circumstances whether they are employed or self employed, getting it wrong can be costly - you may end up with penalties to pay plus tax and NI.

If you have an accountant ask them for advice.

This may also help - but bear in mind it's from HMRC's viewpoint.

 

[Young Recruit]

Put another way then, how can I use contractors correctly and occasionally without 'employing' them?

 

[Scalloway]

Have you tried running your arrangements through the Employment Status Indicator (ESI)? This will give you an idea how HMRC would look at it.

https://www.gov.uk/employment-status-indicator

 

[Young Recruit]

Hi Scalloway,

Apparently self employed but then it crashed!

Question: if the person has told me they are registered self employed does that mean I just need an invoice from them and I can then pay them and log them as a cogs?

 

[Newchodge]

Hi Scalloway,

Apparently self employed but then it crashed!

Question: if the person has told me they are registered self employed does that mean I just need an invoice from them and I can then pay them and log them as a cogs?

No.

You have to establish whether the relationship between you amoiunts to an employer/employee situation. The fact they are self employed elsewhere is irrelevant.

 

[UK Contractor Accountant]

I think you will probably be on safe grounds if you are only using them on a job by job basis once or twice a week and they supply their services to other contractors.

As a minimum you should get an invoice from them and have on file their UTR & NI numbers.

 

[Scalloway]

No.

You have to establish whether the relationship between you amoiunts to an employer/employee situation. The fact they are self employed elsewhere is irrelevant.

I agree.

 

[MyAccountantOnline]

Hi Scalloway,

Apparently self employed but then it crashed!

Question: if the person has told me they are registered self employed does that mean I just need an invoice from them and I can then pay them and log them as a cogs?

As I mentioned previously just because someone undertakes work on a self employed basis it doesnt mean that all work they do is on a self employed basis.

It is your responsibility to ensure you pay people correctly ie pay them as an employee accounting for tax and NI etc if they are employed and on a self employed basis if they are genuinely self employed.

Lots of factors are considered when you look at employment status, and different weighting is given to these factors depending on the case, but typically a self employed contractor will be able to decide when they will undertake work, they will be able to turn down work which you offer to them, you will have no obligation to provide work to them instead offering it to them when required, they will be responsible for correcting unsatisfactory work at their expense, they will submit invoices to you for work done and they will often give a fixed price for work.