The scenario is based on a situation I may face in the future, and is rather complicated (not least of all because I am trying to consider all angles, hence the question on any other implications). As briefly as possible, an acquaintance of mine does some free-lance clerical work. One of the clients she works for has an incredibly old fashioned system of bookkeeping that involves manual ledgers, and this forms part of my acquaintances work when her client gets behind on it. As she has little knowledge of double entry bookkeeping she is struggling with this aspect of the work. (My acquaintance is in a position to recommend my services to other clients, so it would be to my advantage to help her find a solution to the problem). Her client has suggested the possibility of me coming in for one day under the conditions of a casual employee, and that is as far as things have gone so far (thats why I have been checking up with the HMRC website concerning casual employment). Whether this is to help catch up on the backlog of work, or help teach how to do the books is unclear at the moment. It would however give me a chance to suggest my own services on a self-employed basis (I have an ICB Practice License) as I think from the little I have heard about his business that engaging a bookkeeper could save him a lot of money.
My main concern would be if at a later date he suggested me working on the basis of a casual employee in the future, as I would not want to do this for long, and the inconvenience to him of issuing a P46 would probably dissuade him from doing this.
So bearing all this in mind, would I be ill-advised to accept an initial offer of one days employment as a casual employee? As I would be working as an employee for the day, would I be breaking any rules?
As far as I can see I would be OK, but I would value your thoughts on this.
Many thanks. Rich.
-- Edited by Rich on Sunday 28th of October 2012 04:48:11 PM
It could well be that the client is unaware of how easy it is to purchase a service, and if I could get a days work with him I could gain an insight into his business, make the points you mention to him and suggest the benefits of engaging a self-employed bookkeeper. Maybe he considers it would be easier to assess me if I work with him for a day before committing to anything else? Or he may just wish to do his books himself and only call on anybody else when desperate, and I may never hear from him again.
I am now confident on how to approach the situation, and am clear in my mind how far I will go to help my acquaintance out should they contact me again.
Thanks again for your help,
Regards, Rich
-- Edited by Rich on Sunday 28th of October 2012 07:30:03 PM
Would be very grateful if anybody could help me with the following hypothetical situation concerning casual employment.
A sole trader asks a bookkeeper to do a one off job of one days bookkeeping in the sole traders office, using the sole traders equipment and following the sole traders instructions. The bookkeeper is paid £80 (less than the lower earnings limit) for the days work (7 hours) and no arrangements are made for the bookkeeper to work for him again. Following information on the HMRC website, I believe the sole trader would only have to make a note of the bookkeepers name and address and the amount of wages paid. The bookkeeper would have to declare the earnings.
Now assuming that three or four months later, during the same tax year the sole trader asks the bookkeeper to come in and do some more bookkeeping under the same conditions. Would I be right in assuming that the sole trader would then have to complete a P46 for the employment of the bookkeeper, even if no further employment was planned and the money earned was under the lower earnings limit?
I would be very grateful for any advice offered as to whether or not my understanding of the situation as explained is correct, and if there are any other implications the bookkeeper should consider in the above scenario.
I assume that this is a self employed bookkeeper and they do a couple of one off jobs for a client rather than the usual ongoing relationship. But in neither case would a client ever file a P46 for a service provider.
The business owner has purchased a service for which they make payment. There is no deemed employment in the relationship. The bookkeeper never worked for the client but rather provided a service to the client.
The bookkeeper should have invoiced the client for the work done and the invoice paid the same as if the client had approach a solicitor or accountant or indeed any other business consultant or service provider.
That the service provided was less than the lower earnings limit is no never mind. The client is paying for a service, not an employee.
Through the clients books only the payment of the service is recorded and the invoice from the bookkeeper against which payment is made should be filed. That is an expense of the business. Only the bookkeeper is responsible for their own tax affairs.
If the bookkeeper was inconvenienced by the filing of the P46 (being brought up on HMRC's radar as a deemed employee) then they would be within their rights to sue the client for any their time and their professional respresentatives time spent rectifying the situation (that the bookkeeper / accountant can sue the client seems a fact very few clients are aware of).
Personally if this happened to me I would dump the client and my companies solicitors would be involved faster than a ferret down a rabbit hole.
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I read a couple of days work and simply assumed that we were talking about a norrmal service provider arrangement which is what this situation really needs.
Casual working in this situation makes no sense as the employer would be saddling themselves with PAYE, holiday pay entitlement etc. for no additional benefit to their business.
So long as the employer pays the PAYE where the casual worker is over the LEL then there is no reason not to accept this short term gig but it just seems crazy that the are burdening themselves with handling matters that way when it is so much simpler to simply buy a service.
If they are adamant that the want a casual employee for a day then go for it. You can be employed and self employed at the same time even if such is a waste of peoples time and effort from all perspectives.
(Is this perhaps that the client just doesn't understand how simple it is to purchase a service?).
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
You have to be very careful with trying to define and employ somebody on a casual worker basis. Basically somebody has to account for possible tax and NI liabilities somewhere. So I would always consider - should it be me or the user of my services? Visa versa
I'm no expert in this area but in my opinion HMRC will consider the working relationship over a period of time possibly a tax year. I think from HMRC point of view they may try to establish if the person is either employed or self employed first and therefore you or the employer must account for it.
I was not thinking of my current situation, as I am clear in my mind what I am going to do. However, whilst researching casual employment I was surprised that such a short period of casual employment and what could be very low wages (maybe just a few £s) could lead to the requirement to issue a P46. I would like to improve my understanding of how this would work in the real world. For instance, has anybody got experience of businesses that have employed a casual worker, perhaps 2 or 3 times a year? Did they follow the instructions on the HMRC website I highlighted to the letter of the law, or did they deal with it in a different way because they knew something I am unaware of? Or are people unaware of these regulations in general? Or is it just that the issue of very short term casual employees is very uncommon?
Rich.
-- Edited by Rich on Tuesday 30th of October 2012 09:16:25 PM
Up until the situation I mentioned in my first post, I had never had any reason to consider the laws concerning casual earnings. My thinking had always been influenced by a business man I had a conversation with long before I took up bookkeeping who had told me that an employer could employ casual staff if he paid them weekly wages below the LEL, and all he would have to do is put an entry in his books to account for the expense of casual wages. It was not until I considered how being paid a casual wage may affect me that I researched the HMRC website to make sure I got things right and found the attached information.
My scenario mentioned using the sole traders equipment in his office and working under his instructions, so I was confident I could argue I was being employed. Although I never explained it as clearly as I could, I was crystal clear in my mind how to deal with earnings above the LEL, as the HMRC website explains this clearly. That is why I stated in my scenario I would be earning under the LEL. The bit that surprised me was the section of the attachment I have highlighted in red. My understanding of this is that if at any time in the same tax year the worker worked for the employee again, a P46 would need to be issued regardless of whether or not the wage is below the LEL. The way it is explained seems pretty cut and dried to me. As bookkeepers should this be something we make a note of explaining to clients if we are aware of them paying small amounts out in casual wages?
Am I right in my understanding, being over officious or missing something obvious? Would be very grateful for any opinions.
I take it you are currently employed full time somewhere else rather than working as a self employed person ? If you were self employed already there would be no issue
