I've just signed up my first client and helped him register online as self-employed. It's a very small job for a bookkeeper (gotta start somewhere, I suppose?) something most sole-traders would do themselves at this stage, but he wants me to do all his bookkeeping. Which is fine, I understand not everyone is admin minded. However, as he was told to register as self employed by the person he is working for (they are in the plumbing trade - my client is accompanying him on jobs and invoicing him a daily rate for his labour and receiving some training) I am a little concerned it could be disguised employment. Does anyone have experience similar to this? Is it normal practice when a plumber is starting out? Is it my job to determine the status, and if so how far do I take the questioning? Do I just have to be satisfied in my own mind that he is properly self-employed?
Hi Christina
I think if you are assisting him to register as self employed and perhaps dont have the confidence yourself to cover this one, then maybe advise him to get some advise as on the face of it from what you have said this is disguised employment.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I would say it is disguised employment, the fact that he is receiving training makes it more suspicious. If he acquired another client then his self employed status is more legitimate.
Hi, thanks for the replies. I was pretty much offline during the school holidays but now things are settling back down to some sort of normality I thought I'd post an update.
I managed to speak to someone at the ICB who was able to put my mind at rest. Apparently he's done the right thing in registering as self-employed, he is keen to pay any tax/ni he would owe. The responsibility will be on his engager as a Ltd Co, and as I don't work for them I'm not going to worry about it any further. The Ltd Co's accounts were filed by a local firm so it might be interesting to see if anything changes when their next accounts are submitted.
I am going to throw a spanner in the works and disagree with the ICB. It's your client that will potentiality have the fines and extra tax and NI to pay if HMRC decide it is disguised employment and tax him as if he was an employee. The company can subcontract whoever they like and in some cases wouldn't know if the subcontractor only has them as a client or works for several other companies.
I disagree Matt. It has always been my understanding that it is the employer who is responsible, not the worker.
I can't find the actual legislation but I found this http://www.ascotsinclair.co.uk/resources/business_centre/employed_or_self_employed.php
It is the responsibility of the person making the payment to get it right. If you treat a worker as self employed and he or she is subsequently ruled to be an employee, you could find that all the payments you have made will be treated as net payments, and you will have to pay the corresponding tax and employees' NI, as well as the employer's NI. You have no right in law to recover such items from your employees after the event. In rare circumstances that HMRC cannot recover from the person making the payment they may seek recovery of additional taxes and NI from the worker.
Matt: The company can subcontract whoever they like and in some cases wouldn't know if the subcontractor only has them as a client or works for several other companies.
Totally irrelevant I'm afraid. If the employer exercises some control over the worker, they may not have a choice, they should treat him or her as an employee.
One thing is for sure, it's a very grey area, and abuse is rife in certain industries.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
What if someone approaches me to do some bookkeeping work? Do I have to check whether I am their only client before I can let them invoice me? How do I prove that?
From reading the initial post, I personally would say this is disguised employment.
How can it be the business owners responsibility to check if said person is self employed?
There is no register to search.
I see responsibility whereby said business owner requests a person to become self employed - when clearly it should be a contract for service in place, as an oppose to contract for services, to save having to pay the premiums involved in being a bona fide employer. That clearly deserves penalties.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
I think that the confusion in this thread is because the debate is happening as the regulatory environment is changing (New regulations for PSC's come into force in April this year).
Previously the responsibility (and financial penalties) related to disguised employment fell to the employee.
From this April it falls to the employer
What you say does that have to do with the self employed? The changes in the Autumn statement (and bandied before that) are aimed at the self employed and intermediaries... Well, glad you asked... The changes are initially aimed at PSC's but Mr Osbourne has commissioned a report to look into wider self employment so its envisaged that what is currently aimed at one group will spread to cover all similar groups.
In the example that you give Matt, if you hire a bookkeeper then you need to ensure that they are really self employed. Thats not simply a matter of the bookkeeper only working with you otherwise how would any bookkeer ever start in practice (you don't start with multiple clients but that doesn't make you an employee).
There are other considerations such as do they supply their own equipment, can they subcontract the work, do they work set patterns, do they have to ask for holidays / time off.
If a reasonably informed independant third party would, all matters considered, assume that someone is self employed then they probably are.
If one is having to work to convince oneself that you could at a push convince someone that they are self employed if the person that you are trying to convince doesn't look too deeply then in all likelihood they're not.
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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.
What if someone approaches me to do some bookkeeping work? Do I have to check whether I am their only client before I can let them invoice me? How do I prove that?
Normally no, but if you were to tell them what times they had to work, and/or insisted on supplying the tools needed to do the job it could be classed as disguised employment. There are other criteria as well.
If the bookkeeper says I work from home and I can do your books for you, drop them off and they'll be ready in a fortnight then obviously that's different.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I think that the confusion in this thread is because the debate is happening as the regulatory environment is changing (New regulations for PSC's come into force in April this year).
Previously the responsibility (and financial penalties) related to disguised employment fell to the employee.
From this April it falls to the employer
Do you have a source for that Shaun? I know the rules changed for agencies in 2014 and the onus fell on the agency rather than the worker. Other than the link I gave I haven't been able to find an authoritative source but I believe that the onus is on the employer not the employee, I'm happy to be persuaded otherwise if I'm wrong.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
the legislation in the finance act. The one passing responsibility to the employer is FA16 the necessity for which implies even without looking that the responsibility previously lay with the employee (he says looking for an easy way to avoid searching up the small print of a finance act that references it!).
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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.
I disagree Matt. It has always been my understanding that it is the employer who is responsible, not the worker.
I can't find the actual legislation but I found this http://www.ascotsinclair.co.uk/resources/business_centre/employed_or_self_employed.php
It is the responsibility of the person making the payment to get it right. If you treat a worker as self employed and he or she is subsequently ruled to be an employee, you could find that all the payments you have made will be treated as net payments, and you will have to pay the corresponding tax and employees' NI, as well as the employer's NI. You have no right in law to recover such items from your employees after the event. In rare circumstances that HMRC cannot recover from the person making the payment they may seek recovery of additional taxes and NI from the worker.
Matt: The company can subcontract whoever they like and in some cases wouldn't know if the subcontractor only has them as a client or works for several other companies.
Totally irrelevant I'm afraid. If the employer exercises some control over the worker, they may not have a choice, they should treat him or her as an employee.
One thing is for sure, it's a very grey area, and abuse is rife in certain industries.
I agree with the above, that the employer is responsible if they fail to deduct PAYE and NI for a disguised employee. The self-employed person should pay their own tax. To protect themselves they may want to insist on a clause in any contract to say that the employer is responsible for PAYE/NI and there is no recourse to the self-employed person. The employer is bearing the risk in these circumstances.
