I had a potential client ring up on Friday to get me to do a self assessment tax return for him. I am meeting him on Monday evening to go through what he wants (much prefer to do that before giving price/taking on the work).
I had a few concerns when speaking to him & wanted to see what other people think about this.
It is probably a common occurrence since the recession, he is a "self employed" electrician, however, he only does work for one person & he doesn't send invoices, but just receives a statement from the person he works for every month. This looks to me that he is "employed" but the employer just doesn't want to deal with any employment issues. He only did this for 6 months and is now an employee for another business, so wants me to do his "self employed" tax return for those 6 months. He is registered as self employed with HMRC and has received a notification to complete his tax return.
Just wondering if there is anything I should be looking out for? Would it be correct to complete his return under the "self employed" section of tax return, as this is what he has declared he is.
I would go through checklist of criteria of self employed v employed when you see him and give your conclusion of whether you think he is self employed or employed.
If you think he is employed I would advise of the issues should the Revenue also take that view ie they will treat the income he has received as gross wages and look to recover PAYE and EE NIC from him.
If he then wants you to do return as though he is self employed would do that and also put the issues you have discussed with him in an email or letter so that if anything comes back and he blames you then you have evidence of what you advised.
At the end of the day it is self assessment and the client ultimately approves their return as being correct and complete.
I would just do the work and have done with it. The situation has ended now, he is paying his tax & NIC due on his earnings, so the only person HMRC could really chase is the contractor, for employers NIC - which is not your clients problem. In the highly unlikely event that they investigated this 6 months, the expenses you claim through the sole trader could be instead just be shown as employment expenses, so the only thing HMRC could have a go at, is mileage to and from the contractors office.
If it was still ongoing, it would be a different matter. Mark is right about pointing out the situation in your accounts covering letter, but for what it is, I personally wouldn't give it too much time.
I've got a similar situation. I've got a potential client who has been both self employed and employed in the last tax year. He can't find all his proof of earnings and he has a bag of receipts. I've told him to go away and find the proof of earning and to go through his receipts as he cannot just put through any old amount for expenses. Funnily enough within half an hour he had found quite a few of his self employed proof of earnings. He now has to look for his P60 or request a copy from his employer. I've sent him to go through his receipts and asked to see the previous years return to see what has been put through.
I met with the client & he completely understood my concerns. It was kind of a needs must situation, he doesn't really want to be self employed, but that was the only work available at the time. I guess it is a sign of the times!
Ok, so have a few questions on his situation.
1st 6 months of year he was employed
last 6 months he worked as "self employed" freelance electrician. He is registered under the CIS as a subcontractor (which he didn't ask for, but HMRC automatically did this when he applied for self employed) but none of his payments have been made under the CIS scheme.
To be able to do the job (which mainly included call outs to different locations over a wide area), he had to purchase a car, which was only really used to drive to each job. Will I be able to claim a Capital Allowance on this vehicle? As he only worked part of the year & is no longer working self employed? It wont be much (£1500 purchase cost @10% * 6mths = £75 ish).
Also, he didn't finish this self employed work until end of April. Is it possible to include this work after 06/04/13 in this years tax return, so he doesn't have to pay for another tax return next year for a few weeks of work (seems a little unfair!).
