Compliance Check Advice pls (IR35 issue?)

[jaffajeo]

Hey gents,

I was wondering if I could ask you guys for some advice! Basically ive got two compliance checks from hmrc (looking at a limited company im a director of) and my self assessment (as im registered self employed too.)

The mistake it seems ive made, is that I didn't realise Im technically an employee (as a director of a company.) and any income I made I would simply put through my self assessment (as turnover and not 'wages' from the limited company.) The limited company i would invoice (forming approximately 80% of my income) for time and expenses for the work I did self employed.

The amounts we're talking about were (with my self employed expenses) under the personal allowance (struggling artist... not a lot of money!) So I also recieved WTC (because of the enormous amuont of hours I'd work.)

So in no way can i understand that if i have to be an employee (earning say NMW) how i could ever afford myself to do the relatively unprofitable work I do... In anycase chaps, im just wondering how much of an arse kicking hmrc will give me? An accountant had told me that even if i was paid wages (minus what i bore as expenses) id have had no income tax to pay.

Anyway advice appreciated over possible ramifications.

ps - incidentally according to sites discussing (are you employed or self employed Id always presumed by my answers to be obviosuly self employed until i discovered the IR35)



Thanks btw for running this awesome forum and info archive!

[NotAllThere]

IR35 is to do with the contracts that your ltd company has. If your company hires you out as a resouce, via a third party (agency) to a client, then IR35 might apply. What they do in that case is construct a hypothetical contract between you and the client. If that would be an employment contract, THEN IR35 applies.

From what you've written, I doubt it's an issue - it depends how you actually supply your services, the contractual chain.

I also seem to recall, that directors do not have to pay NMW.

[Sockpuppet]

I doubt they'll give you an ass kicking. Maybe some advice on going forward but unlikely to be an ass kicking. They're actually quite nice as long as you're not trying to hide from paying tax.

[northernladuk]

Hey gents,

I was wondering if I could ask you guys for some advice! Basically ive got two compliance checks from hmrc (looking at a limited company im a director of) and my self assessment (as im registered self employed too.)

You have to do a SA as a director of a company regardless of you being self employed.

[BolshieBastard]

Hey gents,

I was wondering if I could ask you guys for some advice! Basically ive got two compliance checks from hmrc (looking at a limited company im a director of) and my self assessment (as im registered self employed too.)

The mistake it seems ive made, is that I didn't realise Im technically an employee (as a director of a company.) and any income I made I would simply put through my self assessment (as turnover and not 'wages' from the limited company.) The limited company i would invoice (forming approximately 80% of my income) for time and expenses for the work I did self employed.

The amounts we're talking about were (with my self employed expenses) under the personal allowance (struggling artist... not a lot of money!) So I also recieved WTC (because of the enormous amuont of hours I'd work.)

So in no way can i understand that if i have to be an employee (earning say NMW) how i could ever afford myself to do the relatively unprofitable work I do... In anycase chaps, im just wondering how much of an arse kicking hmrc will give me? An accountant had told me that even if i was paid wages (minus what i bore as expenses) id have had no income tax to pay.

Anyway advice appreciated over possible ramifications.

ps - incidentally according to sites discussing (are you employed or self employed Id always presumed by my answers to be obviosuly self employed until i discovered the IR35)



Thanks btw for running this awesome forum and info archive!

Go see an accountant quickly. You're not cut out for the DIY accounting route.

[Support Monkey]

As a director of a limited company you are not self employed, you are an employee of the limited company

you could also be self employed doing someothing else but this would not effect your limited company status.

[jaffajeo]

Thanks for the advice guys - and thanks for approving my question mods

I also seem to recall, that directors do not have to pay NMW.

See this was a massive point of misunderstanding as I had thought that to be a director working on whatever commissions I would HAVE to be on PAYE and paying myself the NMW (even though that ltd company could never afford it!) - Thanks Notallthere for the tips.

If i can ask then in that respect my previous WTC hopefully wouldnt be affected since the amount of time I worked was the same? Regarding IR35 I would be simply be commissioned via a client to produce them a singular project (a video or an event) for which i would invoice the company for time and expenses. (The turnaround on these projects would normally be under six months)

Sockpuppet - thats a relief to hear someone say that. See my income was (80% from the company and 20% direct from clients for the year of compliance check.) and was only paid through invoices (the actual sums, minus expenses were under the personal allowance even.)

Can i ask gentlemen what the consequences might be to my expenses (in my SA submission) if they want to argue that my SA should have included invoices to the company im a director in as wages?

You have to do a SA as a director of a company regardless of you being self employed.

See my understanding was that i would have to be enrolled in PAYE and be paid NMW - ugh to know i could for example be self employed in one respect, and simply put monies via (invoices to the company) in another form of classification i didnt realise.

BolshieBastard I do have an accountant whose helping to prepare the relevant information for the compliance etc (though I had done the SA myself - doh... thats a lesson learned, however even accountants seem to get a bit confused it seems in this area sometimes!)

Support Monkey

As a director of a limited company you are not self employed, you are an employee of the limited company
you could also be self employed doing someothing else but this would not effect your limited company status.

I was confused by what this meant really... ie. what constituted an employee and its ramifications. Ie. that i had to work for NMW, would have to limit hours, thus disqualifying myself for WTC and other benefits which as a poor ol' chap that i am i felt entitled to. To me that was what employee meant and was why i felt i had to be self employed.

So that was my misunderstanding... that i can have the benefits (as i see it) as a self employed person, who simply puts monies in another form of classification in my SA (when concerning my company) so long as it does not limit or impinge in my business (ie. NMW etc) is well a relief.

I will discuss this with the compliance inspectors, I hope there are not significant fines or issues relating to this, the sums (for my reported incomes) were as i say generally low (turnovers approx 10 - 12k etc) Any advice on how i should talk to them about my status and how i operated before as to mitigate any ass kicking?

PS - Sockpuppet (i didn't hide any taxes so hopefully that bodes well for their er mercy)

I'll update you guys on my experience (as its soon) but any further advice i'd really appreciate.

(ok one more question)
PPS - If i can just confirm though - as a director and self employed person (submitting an SA) does that mean i don't have to be enrolled in PAYE as a director? Since id still be submitting an SA?

Thanks so much guys - really appreciate the feedback