Self employment confusion

**OrangeHopper** · 7 June 2006, 06:46

Others can put the meat on the bones but, the definition of self-employed means you are working for multiple clients in quick succession or simultaneously.

If you are working for one client, long term, doing a normal 8 hour day at their site, you are most definitely not self-employed.

**Bunnyh** · 7 June 2006, 07:07

It seems to be a bit half and half with me.

I have one main client, I'll be doing odd jobs for a couple of others but primarily just for them.

I am working from home on an 'on request time and materials basis'. I can work up to 40 hours a hour a week and then invoice them for that. I can't sub contract anyone. I have set duties as it's admin work and I also have a notice period.

**nobody here but us chicke** · 7 June 2006, 07:23

employee

Sounds like you are an employee and the company is trying to minimise their obligations to you and reduce their paye bill.

might be worth getting advice. You are potentially due holiday pay and whatever other benefits the company gives, plus you may be due redundancy at the end.

Personally I would find out where I actually stood before raising it with the company, the more you know and the less they know you know, the better.

**IR35 Avoider** · 7 June 2006, 07:24

If your clients are happy to pay you as self-employed, you don't need to worry.

IR35 does not affect you if they are paying you directly, i.e. not paying a company you own.

If you were found to be an employee of the client, it would be a problem for them, not you. They would have extra tax to pay on the "salary" they paid you.

Most contractor clients are not happy to pay people as self-employed because they do not want to worry about the scenario in the previous paragraph. The reason we have companies is because clients and agents won't pay us directly. IR35 is an attempt to crush the loophole of "employees" not being taxed like employees if they put their own company between themselves and the client.

**nobody here but us chicke** · 7 June 2006, 07:27

Oh, ir35

Yes IR35 just means that you get taxed in the normal way. Many people who run businesses take some of their profit as dividends which do not attract national insurance, hence their total payments to the revenue are lower than they would be if they took that money as salsry.

If you really are self employed then tax / ni is slightly different to normal employee tax/ni. Sorry but I am not up on the details. I only know company stuff.

**Denny** · 7 June 2006, 22:07

Originally posted by Bunnyh

Hi all,

I've recently taken on a job that specifies me as a 'self employed independent contractor' and as such I've registered myself self employed with the tax office. Perhaps naively, I assumed it was that simple and I would just fill in a self assessment on my income but a number of people have mentioned IR35 to me and created visions of massive tax bills appearing out of nowhere. I've trawled the internet and this forum but can't seem to come up with a definitive answer.

Will this possibly apply to me or does the fact I am contracted directly to my client on a self employed basis mean I can stop worrying about it? Basically I am expecting to pay tax at a rate similar to that which I'd have with any regular employment, am I right? I'm not looking to lower my tax bill, just want to keep my nose clean

I'm really confused

Thanks for any help and apologies if the query sounds silly to you.

I think you're confusing self employment (sole tradership) with limited company owner management that allows a small salary plus dividends provided your contracts are reflected in the terms and you operate as a 'real business' with the end client rather than a personal services contractor (pseudo client controlled temp operating the same way as their employees would with set hours, client control and so on).

As a sole trader, irrespective of whether you are under client control or not, you will still be taxed on your full income anyway, minus allowable dispensations. That's pretty much the same as you'd be taxed on IR35 minus the allowable 5%. Therefore, you're no better off than if you went through a reputable brollie (as a employee of a limited company payroll service). The only difference is that you don't have to pay employers NI and you have more control if you're acting as a real business and you'd have paperwork with the IR (a preferable option to brollie unless you really do someone else to do all the paperwork).

By the way, that winky looked ominous. Don't ever be tempted not to disclose some of your income on your tax return. That is blatent tax evasion and the IR are always poking into sole traders bookkeeping and accounting set ups, so it's really not worth the risk if there is a papertrail to be found. The only time you could get away with it is if you trusted your client who paid you strictly in cash.

**tim123** · 8 June 2006, 04:53

Originally posted by Denny

As a sole trader, irrespective of whether you are under client control or not, you will still be taxed on your full income anyway, minus allowable dispensations. That's pretty much the same as you'd be taxed on IR35 minus the allowable 5%.

Not true. A genuinely self employed person, doing a job that pay a normal salary level can make significant NI savings over the direct employment option.

tim

**tim123** · 8 June 2006, 04:59

Originally posted by Bunnyh

It seems to be a bit half and half with me.

I have one main client, I'll be doing odd jobs for a couple of others but primarily just for them.

I am working from home on an 'on request time and materials basis'. I can work up to 40 hours a hour a week and then invoice them for that. I can't sub contract anyone. I have set duties as it's admin work and I also have a notice period.

This "can't subcontract" restriction is going to ring alarm bells with the revenue. If you are working at home, doing general admin that requires easy to find skills why can't you subcontract the work to someone else and then deliver it to the client as if you had done it. Obviously the risk of the work not being done right remains with you in this scenario, but that's what being self employed is all about - taking risk!

There is no real reason for this restriction other than to make you a company employee and the IR are unlikely to accept any other status in this case.

tim

**ASB** · 8 June 2006, 11:42

Originally posted by tim123

There is no real reason for this restriction other than to make you a company employee and the IR are unlikely to accept any other status in this case.

tim

So, there are two possibilities.

If he is being treated as a sole trader by the client (i.e. he is invoicing them personally) then the risk falls entirely on the client. If the status check if failed the OP will be the clients actual employee and they get a big bill. He should then get a rebate.

If he is not engaged as a sole trader, ie his co is billing somebody then the risk is IR35.

The OP doesn't seem to have cleared up whether he is acting as a sole trader or not.

Self employment confusion