HMRC update the Employment Status Tool Reply

Determining whether a worker is Employed or Self Employed isn’t always easy.

HMRC updated and improved their tool in April 2015.

The Employment Status Indicator (ESI) tool enables you to check the employment status of an individual or group of workers – that is whether they are employed or self-employed for tax, National Insurance contributions (NICs) or VAT purposes.

The ESI tool is essential for anyone who takes on workers, such as employers and contractors. (The tool refers to anyone in this position as an engager.) Individual workers can also use the tool to check their own employment status.

The tool cannot, however, be used to check the employment status of certain workers:

  1. company directors or other individuals who hold office
  2. agency workers
  3. anyone providing services through an intermediary (sometimes referred to as IR35 arrangements)

The ESI tool is completely anonymous, so no personal details about the worker or engager are requested.

Click here to use the HMRC Tool

steve@bicknells.net

A new type of employment status Reply

The Office of Tax Simplification – Employment Status Report – March 2015 suggests we could see a new type of worker being created, part way between Employed and Self Employed. We could also see the term office holder removed from legislation.

Contractor Weekly reported – This involves the introduction of a new category of worker, a ‘third way’ between the employed and self-employed, acknowledging that some workers do not fit easily into either of the two traditional positions and that they should be subject to a modified set of tax rules. Freelancers might fall into this ‘third way’ and who might be seen as people who have chosen this route of working and want certainty over their status.

Click on this link to read the Employment Status Report

Will this solve the IR35 problem? who will it defined? what should the rules be?

Workers

 

steve@bicknells.net

New reporting requirements for intermediaries Reply

with computer

An intermediary is any person who makes arrangements for an individual to work for a third party or be paid for work done for a third party. An employment intermediary is also commonly referred to as an agency.

From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HM Revenue and Customs (HMRC) once every 3 months.

Agencies will be required to let HMRC know the following details:

  • Contractor’s name, address, date of birth, etc.
  • PAYE reference.
  • National Insurance number.
  • How the contractor was engaged during the period (i.e. was he working via a limited company).
  • The duration of each assignment.
  • Details of the contractor’s limited company (e.g. company registered number).
  • How much was paid to the contractor.

The regulations will give HMRC information that will enable it to decrease false self-employment and abuse of offshore working. This will help HMRC to:

  • support intermediaries that comply
  • penalise intermediaries that don’t comply
  • make sure the right tax and National Insurance is paid by people working through intermediaries
  • reduce unfair commercial advantage

Here is link to the full reporting requirements – Legislation Link

This is the link to consultation – Consultation

steve@bicknells.net

Would an online IR35 test help? 2

Tablet

The Term “IR35” became established following a Budget press release issued by the Inland Revenue on 23rd September 1999. That press release was called “IR35”. At its simplest, IR35 is the way in which the taxman closed a loophole that was allowing many contractors and freelance professionals to avoid paying large amounts of Tax and National Insurance.

In 2012 HMRC put forward the Business Tests but they haven’t been as successful as first thought.

Here are the 12 tests, scores shown in()

  1. Business premises (10)
  2. PII (2)
  3. Efficiency (10)
  4. Assistance (35)
  5. Advertising (2)
  6. Previous PAYE (minus 15)
  7. Business plan (1)
  8. Repair at own expense (4)
  9. Client risk (10)
  10. Billing (2)
  11. Right of substitution (2)
  12. Actual substitution (20)

A score less than 10 is high risk and a score more than 20 is low risk. Fail the test and it could cost you a great deal in tax.

In general the key test tend to be:

  1. Substitution
  2. Control
  3. Financial Risk

HMRC launched the ESI (Employment Status Indicator) a while ago.

The recently published Minutes of the IR35 Forum’s last meeting held on 24th July reveal that HMRC are keen for contractors to be able to assess their employment status by way of the Employment Status Indicator (ESI) tool.

Will this resolve the IR35 Status problems?

 

steve@bicknells.net

What are the differences between employees and contractors? Reply

According to figures released by the Office for National Statistics last week, self-employment is at its highest level since records began almost 40 years ago.

There are currently 4.6 million people self-employed, with the proportion of the total workforce that are making a living for themselves sitting at 15%, compared to 13% in 2008 and less than 10% in 1975.

As highlighted by Everreach and the Daily Mail.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

Workers

steve@bicknells.net

Are you ready for the OTS to check your employment status? Reply

And now round two of justify it

Contractor Weekly reported on th 29th July 2014…

As part of the ongoing mission to create a simpler and fairer tax system the Office of Tax Simplification (OTS) has been tasked with carrying out reviews of employment status and also tax penalties, with a view to producing a report in time for next year’s Budget.

According to the OTS, the boundary between employment and self-employment no longer reflects modern working patterns, particularly in recent years. Many people have multiple jobs and can be classed as employed in one whilst self-employed in another. The rise of the freelancing business model has also caused some to suggest this is a ‘third way’ between employment and self-employment.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

It will be interesting to see the report that the Office of Tax Simplification (OTS) produce, especially if they find a ‘third way’

steve@bicknells.net

Doctor, Doctor, I think you should be an Employee 1

Young Doctor with stop sign

A report in the Telegraph on the 14th July 2014…

Dozens of NHS executives face possible investigation by HM Revenue and Customs after they refused to answer questions about their tax arrangements, it can be revealed.

An investigation has identified 86 senior health service officials paid off-payroll who have refused to give assurances to their employers that they are paying the correct level of income tax and national insurance.

They are paid through service companies – arrangements that allow public sector employees to be paid as contractors through private companies, potentially cutting their tax bills.

http://www.telegraph.co.uk/health/healthnews/10966314/Dozens-of-NHS-executives-face-tax-inquiry-into-off-payroll-earnings.html

Monitor found 30 foundation trusts had issues to resolve in their report of the 10th July 2014:

  • 20 foundation trusts have 1 or more senior employees paid through an off-payroll arrangement, and they are waiting for responses after asking those employees for assurance about their tax arrangements
  • 23 foundation trusts (including some of the 20 above) still have at least 1 board member or senior member of staff with significant financial responsibility employed through an off-payroll arrangement
  • of these 23 trusts, 9 are facing wider issues relating to their performance which they have explained is affecting their ability to recruit and retain permanent skilled staff; this resulted in the need to use interim off-payroll contracts to attract high-performing staff to help improve the foundation trust’s situation
  • as a result of their performance issues, these 9 trusts are facing current enforcement action by Monitor, which is unrelated to their use of off-payroll employment
  • out of those 23 trusts, the other 14 which are not facing enforcement action have plans to end off-payroll arrangements by the end of the year

Will this end the use of PSC’s in the NHS?

steve@bicknells.net

What is your status – Self Employed or Employed? Reply

Business people group.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

If a worker should be an employee HMRC will seek to recover the employment taxes from the employer not the worker, so there are considerable risks for the employer if the status of its workers is wrongly assessed.

Some employers might decide to insist that sub-contractors must be limited companies, as companies can’t not be reclassified as employees.

The sub-contractor would then need to assess whether IR35 applies to their contract. If IR35 does apply then please read this blog on Deemed Payments

steve@bicknells.net

 

 

 

BBC questioned about the employment status of celebrities 5

This Monday (18th July), the BBC’s CFO, Zarin Patel and its head of employment tax, David Smith, were quizzed about the use of personal service companies (PSC’s) within the corporation by the Commons Public Accounts Committee. It emerged that out of the Beeb’s 467 presenters, 148 broadcasters, i.e. nearly a third, were being paid via PSC’s. These 148 are not unique, however, as the BBC engages 25,000 freelancers.

http://www.contractorweekly.com/contractor-news/tax-a-ir35-news/512-bbc-ir35-witch-hunt

This has been under discussion for a while and back in 2010 Accountingweb reported

Amongst those appearing as freelancers are: Jeremy Paxman (earning about £1m a year); Fiona Bruce (with annual earnings of around £500,000); and Fearne Cotton (who rakes in around £200,000 per annum)*.

However, not all presenters have fled the broadcaster’s payroll, with the likes of Huw Edwards (Ten O’Clock News presenter); Nick Robinson (political editor) and Evan Davis (presenter of the Today programme) still prepared to suffer good old fashioned PAYE.

http://www.accountingweb.co.uk/topic/tax/ir35-and-celebrities-big-bucks-contracting/428140

It is hard to see on the face of it why a TV presenter would not be an employee based on:

  • Control
  • Personal Service/Subsititution
  • Mutuality of Obligation
  • Financial Risk

A BBC spokesman stated that the corporation provides HMRC with a detailed annual report of all payments made to PSC’s.

In response HMRC has now announced that it will increase its investigations into PSC’s. After admitting that HMRC had only enquired into 23 PSC’s, the department’s chief, Lin Homer, vowed to increase such investigations ‘ten-fold’ over the next year.

steve@bicknells.net

Did you hear about the case of the lap dancer and the night club? employment status 2

Miss Quashie, who has a daughter, began work as a stripper at Stringfellows in June 2007. She earned thousands of pounds to provide for her child.

But she was dismissed from the Central London nightspot in December 2008 following allegations of drug use, which were changed to an allegation of dealing after she took a test. She denied both allegations.

Read more: http://www.dailymail.co.uk/news/article-1319609/Face-lapdancer-used-womens-rights-campaigner-suing-sacking.html#ixzz20aX6oMIj

At Tribunal the the judge ruled she was an employee, but now the contract could be rendered illegal because of Miss Q’s dealings with HMRC.

Stringfellows argue that even if Miss Q was employed she acted illegally by representing to HMRC that she was self employed.

A key point in the case now is that ‘ any illegal act by a worker in the context of the job they do for you might invalidate the contract’ this could include misleading HMRC. [Indicator Tips&Advice Tax 28-06-12]

http://www.accountingweb.co.uk/article/stringfellows-stripper-goes-back-tribunal/527059

Employment status is complicated area that seems to continue to become more complicated.

steve@bicknells.net