Self-employed benefits loophole

**Mich the Tester** · 13 May 2009, 13:17

Oh the joys of socialism.

**Pondlife** · 13 May 2009, 13:44

How was he classed as self employed if he ran a recruitment business employing 20 people? Why was he not paying employers NI on his own salary.

What am I missing here as it makes no sense to me whatsoever.

**blacjac** · 13 May 2009, 13:51

Originally posted by Pondlife View Post

How was he classed as self employed if he ran a recruitment business employing 20 people? Why was he not paying employers NI on his own salary.

What am I missing here as it makes no sense to me whatsoever.

Perhaps he didn't take a salary or form a Ltd Co....

It's quite common, my father in law is a builder who employs 2 labourers..

There is no Ltd co involved, all the money he gets in is his. He pays his staff & expenses out of this money, what is left is his to keep. He then declares this on his annual SA and pays the relevant taxes.

**Pondlife** · 13 May 2009, 14:07

"If I didn't pay my employers National Insurance contributions when I had my business I would have been threatened with legal action, but when I'm in a situation where I need help I can't get any," he says.

The bit in bold implies that there was a Ltd Co involved. So why no class 1 NIC on his earnings?

**Mich the Tester** · 13 May 2009, 14:11

How has he ended up personally bankrupt and with no savings? Isn’t the point of an Ltd that the business can lose money but your liability is limited to the money you’ve put in?

**Pondlife** · 13 May 2009, 14:12

Originally posted by Mich the Tester View Post

How has he ended up personally bankrupt and with no savings? Isn’t the point of an Ltd that the business can lose money but your liability is limited to the money you’ve put in?

Unless he was stuffing his savings back in to keep it afloat.

**Sysman** · 13 May 2009, 14:18

Originally posted by Pondlife View Post

"If I didn't pay my employers National Insurance contributions when I had my business I would have been threatened with legal action, but when I'm in a situation where I need help I can't get any," he says.

The bit in bold implies that there was a Ltd Co involved. So why no class 1 NIC on his earnings?

No it doesn't imply a Ltd Co. There are many self employed people who employ others (from corner shop to the entertainment industry) and of course they have to pay employers' NIC at the prevailing rates for the salaries/wages they are paying.

Unfortunately, had he gone the Ltd Co route when times were better, then he would have had the option to put that into receivership and not gone personally bankrupt.

**Mich the Tester** · 13 May 2009, 14:22

Originally posted by Sysman View Post

No it doesn't imply a Ltd Co. There are many self employed people who employ others (from corner shop to the entertainment industry) and of course they have to pay employers' NIC at the prevailing rates for the salaries/wages they are paying.

Unfortunately, had he gone the Ltd Co route when times were better, then he would have had the option to put that into receivership and not gone personally bankrupt.

Difficult to imagine. Although here on the continent Ltds are expensive (18,000e capital plus 2000e solicitors fees), in the UK you can set up a Ltd for less than 100 pounds, as I understand it. Why wouldn't anyone do that?

**Platypus** · 13 May 2009, 14:47

Originally posted by Mich the Tester View Post

Why wouldn't anyone do that?

I know several self-employed peeps in my area - they won't go Ltd because they worry about the cost of an accountant. I've pressed them to try to understand what they mean and they're convinced that being Ltd will cost them more money than being SE so they won't convert.

EDIT: I suspect they haven't explored the low salary / high divs route

Self-employed benefits loophole