self employment & tax + other

[jasoon]

Been self employed since Sept 08, can you confirm that I've grasped this:

I pay about 22% tax (if I'm below about 35 k pa), from Sept 08 to April 09 when I do my tax return minus about 6k personal allowance. This amount is due in Jan 2010.

Also due in Jan 2010 is 50% tax on projected earnings from April 09 to Jul 09?

Then in April 2010 I pay the remaining balance and get a tax refund if I overestimated my earnings?

Also, how lenient are they with expenses? Not sure if it would be more financially beneficial to get an accountant? I'v kept on top with my invoices, MS Excel'ed eveything, with dates, receipts etc.

Also x2, will there be a bit on the tax return for student loan repayments if I've earned over 16k a year?

Also x3, I am registered self employed, but all my work since Sept (bar one), has been as a locum for one company, (though obviously not an actual employee of the company), but could you actually argue that I am in fact not self-employed, for some reason?

Thank you

 

[temper_tantrum]

Yes to everything (but there's a set period of time for which the rule about only being employed by one firm applies, I think it's a year or more).

Expenses - It depends how complicated they are, really. I didn't bother, but then mine are simple.

 

[ethel]

go to a workshop: http://www.hmrc.gov.uk/bst/index.htm

 

[Badgers]

http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073789606

 

[topaz]

Yes to everything (but there's a set period of time for which the rule about only being employed by one firm applies, I think it's a year or more).

whats the rule then? if youre employed by a single company for over a year youre in fact NOT self employed?

 

[temper_tantrum]

I'm not sure of the detail, but I'm sure there's some rule about it, yes - my company is the sole employer of someone who's technically 'freelance' and their line manager mentioned it the other day.

 

[pinkmonkey]

Yes you have to be VERY careful if you only have one client - especially if you work in their office and use thier equipment - you may as well be an employee.

 

[ethel]

i've never heard about of time being relevant. it is relevant if you are talking about temporary employees as they shouldn't be temporary for more than 3 years.

here's the guidance for self employed vs employed:

Employed or self-employed?
In order to answer this question it is necessary to determine whether the person works under a contract of service (employees) or under a contract for services (self-employed, independent contractor). For tax and NICs purposes, there is no statutory definition of a contract of service or of a contract for services. What the parties call their relationship, or what they consider it to be, is not conclusive. It is the reality of the relationship that matters.

In order to determine the nature of a contract, it is necessary to apply common law principles. The courts have, over the years, laid down some factors and tests that are relevant, which is included in the overview below.

As a general guide as to whether a worker is an employee or self-employed; if the answer is 'Yes' to all of the following questions, then the worker is probably an employee:

Do they have to do the work themselves?
Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
Can they work a set amount of hours?
Can someone move them from task to task?
Are they paid by the hour, week, or month?
Can they get overtime pay or bonus payment?
If the answer is 'Yes' to all of the following questions, it will usually mean that the worker is self-employed:

Can they hire someone to do the work or engage helpers at their own expense?
Do they risk their own money?
Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
Do they agree to do a job for a fixed price regardless of how long the job may take?
Can they decide what work to do, how and when to do the work and where to provide the services?
Do they regularly work for a number of different people?
Do they have to correct unsatisfactory work in their own time and at their own expense?



http://www.hmrc.gov.uk/employment-status/index.htm

 

[jasoon]

Hmm, some of those look dubious. Basically, I'm working more or less part time hours for 1 company since sept (apart from 1 day where I worked for another company). It's pharmacist work, so yeh paid by the hour, no one directly telling me what to do, but I have to follow pharmacy protocols as weel as internal standard operating procedures, dont get O/T or bonus (but pay can vary if you do w/e or evening work)....I know quite a few who just work for 1 company and haven't heard of them being 'brought up' on it...

On a side Q... if I become employed p/t 3 days a week in a related line of work, but do freelance/selfemployed work 2-3 days a week...would the 2 tie together? As in some kind of tax relief or separate entities (1/2 employed and 1/2 selfemployed status)?

 

[ethel]

you'd still get your one personal allowance. is that what you mean?

 

[jasoon]

Yep, but what I be pigeon holed into one status or be classed as pne or the other..

 

[newbie]

Hmm, some of those look dubious. Basically, I'm working more or less part time hours for 1 company since sept (apart from 1 day where I worked for another company). It's pharmacist work, so yeh paid by the hour, no one directly telling me what to do, but I have to follow pharmacy protocols as weel as internal standard operating procedures, dont get O/T or bonus (but pay can vary if you do w/e or evening work)....I know quite a few who just work for 1 company and haven't heard of them being 'brought up' on it...

that sounds ever so much like you're an employee, not selling services as a self employed contractor.

Why do you, or the company you're working for, think it's not?

On a side Q... if I become employed p/t 3 days a week in a related line of work, but do freelance/selfemployed work 2-3 days a week...would the 2 tie together? As in some kind of tax relief or separate entities (1/2 employed and 1/2 selfemployed status)?

the employments would be taxed PAYE, the income from being 'in business on your own account' would go on the self assessment form. The eventual tax liability will be a mixture of the two.


btw in your op you didn't mention National Insurance- the self employed are potentially liable for both Class 2 & Class 4.

 

[newbie]

Yes to everything (but there's a set period of time for which the rule about only being employed by one firm applies, I think it's a year or more).

no there isn't. As an example a barrister, who is self employed, is an employee if they take a job as barmaid a few evenings a week. The distinction is on a case by case basis and revolves around the concept of being in business on your own account. Earnings from being a barrister qualify but those from being a barmaid don't.

Over the years I've had my case looked at twice. On the first occasion I had to answer questions for each invoice I'd issued going back 6 years, the second time only a couple of years. The dozen or so questions were around the areas outlined in sarahluv's post. On both occasions a few invoices were found to be incorrect and should have been employments. The companies I worked for were then heavily investigated because they were not paying employers NI and tax- disguised emploiyment is a significant fraud and is favoured by dodgy employers as it saves them money and avoiuds giving rights to their workforce (holiday, sickpay, etc).

 

[jasoon]

that sounds ever so much like you're an employee, not selling services as a self employed contractor.

Why do you, or the company you're working for, think it's not?



the employments would be taxed PAYE, the income from being 'in business on your own account' would go on the self assessment form. The eventual tax liability will be a mixture of the two.


btw in your op you didn't mention National Insurance- the self employed are potentially liable for both Class 2 & Class 4.

Sorry? I'm not an actual employee. I'm self employed, and registered as. I'm told where to go by agencies, and so far, have choen this one big companty because I kno their computer system well (hope to learn other systems). I am not an employee of the company. I have no signed contract with them. No set hours/week with them. Not given holidays by them. Not told what branches to work at by them.

 

[newbie]

a couple of the more important questions from #8 above.

Can they hire someone to do the work or engage helpers at their own expense?
can you substitute someone else for a booking? or turn up with a team and do the work in a hour and then clear off? if not there's a very strong liklihood you're an employee.

Do they risk their own money?
do you?... really... how? if the only risk you run is losing your job, or not being rebooked, you're an employee.

Do they agree to do a job for a fixed price regardless of how long the job may take?
it's all about risk... do you quote for a job and profit if you can do it in less time than you estimated, but lose if if takes longer and lose heavily if it all goes pearshaped and you have to engage someone else to dig you out of the shit? if not... you're an empl- you can see where this is going.

Do they have to correct unsatisfactory work in their own time and at their own expense?
risk again. Employees get paid to correct their mistakes; a business is contracted to deliver a completed product or service and that's what they have to do, however much it costs them to do it. UIf you're self-employed you are a business and you have to pick up the tab when things go wrong.


think it through. Are you in business- what do you stand to lose if something goes wrong? If you're in business then you can profit from your own ingenuity or efficiency or lose through your own stupidity or negligence or inexperience. Or indeed from bad luck or all sorts of stuff outside your control.

I'm self employed, and registered as.

this is a fundamental misunderstanding. Sorry but it is. You are registered so that if you have income resulting from self-employment you can be taxed and pay NI on it. But you can also get income from employment. Each job is assessed on a case by case basis.

I have no signed contract with them. No set hours/week with them. Not given holidays by them. Not told what branches to work at by them.

none of that is relevant to deciding whether any individual job is an employment or a business deal, except perhaps that they might be trying to scam you out of holiday entitlements. (not sure what the bit about branches means tbh)

I'm told where to go by agencies

curious. For their own protection a lot of agencies insist on dealing with Ltd Companies rather than self employed contractors, but maybe that only in some fields. I don't work through agencies, so I don't know if IR35 applies to you but it might be worth reading up about it.


On the face of it, unless you are taking on risks of being in business that you haven't described here, it sounds like the Revenue would consider you to be an employee of the agency.

 

[jasoon]

What I mean by 'branches' is that there are different pharmacy stores, you know like theres millions of Boots, Lloyds etc.

I work 99% for one company...I get work with them via: some of the companies area coordinators who have to ensure all branches are covered by their own employees, outside people (me), etc. Other work is via 3 agencies.

I just realised, I know at least 2 different people who work f/t in a different pharmacy branch...except the company employees them as 'self employed locums', not 'employees' because they've decided it would be cheaper that way (no sick pay, no holiday pay, pension scheme, etc). So I guess there must a way round it. I also know of locums who just work for one company like me (be it, Tesco, Boots etc), and they haven't been tapped up by it by HMRC. Either they haven't been audited by the HMRC or have come up with some explanation I guess.

 

[newbie]

fair enough, maybe your industry sector is treated differently for some reason, and the normal legal requirements don't apply. I dunno, it seems odd, I'm still doubtful that your work should be taxed as self employment unless you can really answer the questions above satisfactorily, or get clear advice that for <whatever reason> they don't apply.

What happens if IR decides the other locums are in disguised employment? Ultimately they can potentially be told that the 'legitimate business expenses' they've claimed tax relief for didn't apply and get sent revised tax bills going back up to 6 years. Consequences like that make it worth getting specialist advice. Your union or an accountant or whoever ought to be able to advise, as could the Revenue at one of their advisory sessions.

 

[Looby]

fair enough, maybe your industry sector is treated differently for some reason, and the normal legal requirements don't apply. I dunno, it seems odd, I'm still doubtful that your work should be taxed as self employment unless you can really answer the questions above satisfactorily, or get clear advice that for <whatever reason> they don't apply.

^^^ This. You've said nothing that makes me think you're self employed apart from the fact that you think you are. You need to call your tax office and speak to a status officer because if you do get picked for an enquiry you could end up owing a lot of money if you're wrong about this jasoon.

 

[jasoon]

Thats true. Will look into it/