Ok, so I'm still having issues with a client of mine.
Basically my client attended a new business start up scheme who told her that she can easily hire workers to do dog walking on a trial basis, but after the trial the dog walkers become self employed. When I noticed my client months ago advertising a job vacancy I told her then that she needs to ensure that they are informed from day one that they are self employed, and not an employee. They will be responsible for their own tax and business decisions. I have no problem with my client testing staff to ensure they are suitable, however I fear that she has got totally confused between her being self employed and these dog walkers who are also supposed to be self employed. Due to the advice of the start up scheme, she thought that the girls wouldn't be self employed until now, after the trial period. I've explained that as soon as those girls decided to take on the work as a self employed dog walker and started working for you, that is when their self employment started and they should have registered with HMRC. They need to pay tax on all income from day one.
I've just looked at the books of one of the dog walkers (a new client) and noticed that she began dog walking back in April 2012 (long trial period!). Shes been paid all income for the dog walks less a small commission. She hasn't registered as self employed. I've spent all money pointing out that self employed goes back to when work first commenced and now shes is in a spin, not wanting to pay agreed fees etc. for working out back dated figures. She has no expenses other than a mileage allowance and use of mobile.
But my main concern is that these girls shouldn't be self employed, they should be employees. 1. They're told what dog walks to do 2. They don't do dog walks for any other customer. 3. They don't bill my client for their time, their money is automatically paid after its calculated by some software. 4. My client wants to pay my fees for doing their books direct out of their earnings! 5. She pays for public liability insurance, but she says that this insurance covers the self employed as well. (I noticed an employers liability certificate back in 2012 and brought this to her attention as she doesn't employ anyone, but she states it will cover self employed. Is this possible?). The dog walkers don't have their own insurance. 6. She provides them with dog bags etc, but says nothing to stop them buying their own as well. 7. She provides them with basic uniforms (although not claimable as general everyday clothes).
Does this sound like an employee/employer relationship or a subcontract arrangement.
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 actually sent this link to one of the girls this morning, but no response!
Its driving me mad, no-one listening!
Can I ask where would I stand in this. If I believe that they are employees and they want to treat themselves as self employed, should/can I continue to do their books? Would I need to inform MLR?
Gill. Perhaps ask for their New Business Start-up Scheme representative to ask if he/she did indeed advise that these dog walkers were self employed. Not that it would do much good now except show your client you are prepared to challenge their alleged font of wisdom.
It's a little far-fetched that your client has also been left under the impression that income tax doesn't apply to them straight away.
I'd be tempted to state you're unwilling to act as accountant for the workers but obviously you'd have to tread carefully in order not to lose the client entirely.
Thanks Tim... treading gently but infuriates me when they'll happily pay money to someone who's steared them in the in the wrong direction, but don't want to pay me when giving correct advice! They don't want to pay me for backdated work!
More than once I've heard the immortal line "But we've already paid for that"...
Yep, they paid someone else who got it wrong but don't seem able to contemplate that I am nothing to do with the person that they got rid of!
Ended up with one putting it in terms of if you order a toy train set for your son from Argos and then went and picked it up off the shelf in John Lewis arguing that you had already paid for it, how far do you think that would get you!
Clients! Can't live with them, can't kill them.
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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.
Client decided to go on holiday now, so will find out whats happening next week.
I'm still concerned that she doesn't understand what having self employed workers means to her, yet she won't listen, so I suppose the onus with remain with her, unless the dog walkers decide to fight for their rights (which I don't think they will!)
If they are deemed to be employed (which is sounds like they are) then if she is investigated by HMRC they will fine her and make her pay all the NI and TAX that she hasn't paid for them. Could be a big bill!
Also if the dog walkers are indeed self-employed and walk dogs for others etc then if they haven't registered with HMRC they will get fined etc.
Looks a messy one to me that you probably won't win as they don't understand it all.
Think you will be banging your head against a brick wall.
I think when I have spoken to my client again, I am going to put it all in writing highlighting the issues I have with the setup and draw her attention to the consequences should she be wrong. At least then I know I've advised her and she can make her own decisions. I can understand why she wants them to be self employed, its much easier for her than having to deal with all the PAYE red tape at the moment, but in the end she has to be aware that fines can be imposed. And she needs to ensure that she is making it clear to the dog walkers that they are SE. The problem is that I don't think they know what SE is either.
At the moment because the girls only get paid for the dog walks that they do she's treating them as self employed, but the girls in my opinion don't have a choice as to what they do, its all set out for them day after day.
I've even read the HSE Employers Liability information to check whether Employers Liability can cover subcontractors which is as clear as mud to me as well..it states
"It does not matter whether you usually call someone an employee or self-employed or what their tax status is. Whether you choose to call your contract a contract of employment or a contract for services is largely irrelevant. What matters is the real nature of your relationship with the people who work for you and the nature and degree of control that you have over the work they do."
This kind of tells me that if she has control over them, then she should have Employers Liability, even if they are actually subcontractors?
I've already done the head banging.... and I think it will continue for some time yet.
Doesnt matter what she says or what a contract says.
If HMRC looks at it they will treat it as it is not what she wants it to be.
From what you say they are clearly employees.
1. If they are told what walks to do and when
2. Have fixed hours working for her
3. Dont do work for anyone else
4. She provides their equipment in this case dog bags and uniform.
5. Dont raise invoices and are paid an amount as they are told by your client, expect it will be an hourly rate.
If that isnt a clear employee/employer relationship then dont know what is.
At the end of the day the payments that are made by her to the walkers are being paid and HMRC arent getting anything, no PAYE/NIC, self employment tax/class 4 NIC, nothing. Which they wont be too pleased about.
All you can do is advise her accordingly and put it in writing.
If she doesnt take your advice then you are possibly compromising your position with HMRC as doesnt look good if you advise her something, she chooses to ignore it and you still act for her.
Personally I would tell her I couldnt act for her if she doesnt do as I advise though that would be a decision you would need to make yourself.
You dont want to risk your reputation for one client.
A client doesn't have to follow your advice, but how does it reflect on you if he ignores it? I sacked a client once (sometimes I got three days' work in a week from him) for declining to do as I suggested. I left immediately, despite him threatening to sue, and I could easily have lost if he had.
But he was the one who went to gaol, not me.
I now always put an "irretrievable breakdown of relationship" clause in my engagement letters now.
Back to the topic: Yes, Gill, I'm sure the girls are employees. Give your client your considered opinion and tell her it will put you in a very difficult position if she ignores it. That way, you warn her how seriously you are taking this issue, but giving yourself a little wriggle room if you feel you need it.
This thread has been really interesting to read as I have a friend who dog walks in a very similar situation to this. I have spoken to her about registering as self employed but hadn't thought whether she should be employed. I bet there are lots of people in similar situations.
After a long discussion with client, she appreciates that I have brought this issue to her attention again as she doesn't want to be stung by HMRC in the future, however she still believes that the employees are self employed. She has issued them all with a contract of service and stands firm that the girls can choose what walks to do etc.
I have raised with her my reasons why it looks like they are employees and explained that if HMRC believe the same then she could face large penalties. My client also confirms that if she had to have them as employees she wouldn't be able to afford them (same story for a lot of small businesses) but she has agreed to not just dismiss the situation. She is going to seek advice from others including ACAS and an employment solicitor that she has used in the past.
Time will tell to see what the final decision is. At least she is listening to me now.
Worth noting though, a contract OF service is an employment contract and quite different to a contract FOR services.
If she used that line to HMRC they would be all over her like a rash.
kind regards,
Shaun.
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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.
She's left a contract with ACAS to examine, so hopefully they will pull her up on any issues. I do wonder if they are the right people to ask though, as apparently they told her yesterday that if the girls are happy then their shouldn't be any issues!
I think its been a lot of confusion and misunderstandings from previous advice she received, this training scheme she used apparently helped her set up the contracts etc
Great, sounds like the wrong initial advice, the wrong contracts and the wrong people looking at the situation (if the employee's are happy then everything is fine, lol).]
Sure that the original advisors put basically nothing in writing so everything is deniable as a misunderstanding of what they were actually saying by the client.
Really annoys me when you hear of the blind leading the blind and then the likes of ourselves get a hard time because the reality that we paint is not the one with the pretty colours and smelling of roses that our clients were initially sold.
Wonder what qualifications this expert advisor had? (I'm suspecting a blank space on the business card where many letters should be!).
-- Edited by Shamus on Tuesday 25th of February 2014 02:21:35 PM
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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.
This strongly echos a (helpful) conversation I had with ACAS last year about holiday pay - in amongst they told me it was generally up to the worker to claim their rights and if they didn't there was unlikely to be a sanction or penalty. Their comment 'if the girls are happy then their shouldn't be any issues' seems to stem from the same vein that the worker can forgo their employment rights.
No doubt ACAS staff are very good at what they do but unfortunately employment status is a matter of fact not preference and HMRC would seek back-dated PAYE from your client should she be found to have got the status wrong.
