The Framers Forum

I'm a Sole Trader and have worked on my own for the last few years since I setup in business. Just recently a friend of mine has been helping me out for 6 hours a week, no more than that, he is self employed and I assume I can just get him to invoice me for his services and I pay him ? Is it as straight forward as this, probably not ... any advice gratefully received.

Thanks in advance,
Adam/Bagpuss

strictly speaking its not as simple as this
generally if he's working in the same place for the same person using your tools equipment and materials on a regular basis he's an employee.
some people get away with it, others get stomped on by HMRC.

I had a subcontractor come to work for us, he had his own separate company, and came in on an ad hoc basis, or completed the work at his own workshop with materials I supplied, and he invoiced me with A VAT number. That we could just get away with.

This is what HMRC say: I've highlighted the relevant parts.
(QUOTE)

You are probably self-employed if you:

run your own business and take responsibility for its success or failure
have several customers at the same time
can decide how, when and where you do your work
are free to hire other people to do the work for you or help you at your own expense
provide the main items of equipment to do your work

You are probably employed if you:

have to do the work yourself
work for one person at a time, who is in charge of what you do and takes on the risks of the business
can be told how, when and where you do your work
have to work a set amount of hours
are paid a regular amount according to the hours you work, and get paid for working overtime - even if you do casual or part-time work, you can still be employed

You can also be employed and self-employed at the same time, perhaps by working for an employer during the day and running your own business in the evenings. Think about each contract separately - you may find that you are self-employed for one but employed for another.

There's no legal definition of employment or self-employment, so if there's doubt about someone's employment status the decision is made by referring to previous judgments - known as 'case law'. Whether you are employed or self-employed depends upon the facts of your working arrangements, what your contract says, or a combination of both.

anyway, someone will probably come along and tell you what you actually want to hear any minute.

But you will probably find that its simpler to treat him as an employee, on a zero hours contract, and not spend your time skating around grey areas of thin ice with HMRC. You actually have an employee, imho, you should be deducting his tax and national insurance, because if this guy fails to pay his tax or has other dealings (or problems) with HMRC you will come into in the spotlight as well, and they will want to get the tax and NI due from the easiest possible route, which will then be you.

HMRC can be fickle. All you need is a local "clampdown" and people who employ casual labour on a self employed basis are the prime targets, becaus ethey get two for the price of one.

plus if the guy later decides he doesn't want to pay the tax he owes HMRC, he can simply get it to HMRC compliance office to look at, who will decide that you are his employer, and you owe them tax, and interest, and penalties, and you are then the one in trouble for trying to evade tax.

But what do I know, none of this has ever happened to me.... has it???

I ought to have added that at 6 hrs a week the tax and NI will be pretty insignificant anyway. if he's already self employed he can deal with that and offset any tax deductions you make in his annual tax return.
I'd suggest find out his tax code, calculate how much tax he'd pay, (which wont be much) and you'll probably find that at the end of the year the extra few pounds is well worth it to keep HMRC off your back, because they can delve into the past 6 years as well.

how do contractors do it then

most of them are company owners and work on short term contracts for fixed price with companies?

That's a whole different ball game. There are sub-contractor certificates called 715's (or used to be) and you as the employer of the contractor have to see the 715 and quote its number. I do believe that this has been tightened up even more and given different grades of 715 dependent upon size of Company. In all but the largest (and HMRC approved) companies the 715's only give you a registration to book against. You still have to deduct tax at the basic rate for all works which you remit to HMRC.

This may be different in RoI, and in fact I am sure it is, but over here it is difficult to get away from paying gross amounts to the subbie for anything.

the majority of sub-contractors are in the construction/maintenance industries on the 714/715 schemes.

the 714 certificate is held by the subcontractor, and the 715 is the ticket (called a voucher) which is given to the contractor by the subcontractor.
There are different types of 714 for sole traders, limited companies etc. The 714 allows the subcontractor to issue a 715 voucher which the contractor sends to HMRC with details of the amount paid.

Basically the 715 voucher takes the tax liability away from the contractor. without a 715 he still has to make deductions.

part time employee on zero hours contract and PAYE starts looking more the thing now eh

Self employed people are not allowed to work as employees of other self employed people on a regular basis without the self employed employer giving them a wage slip and deducting PAYE and NI. Sorry, but that's HMRC's rules and there's no way around it!

I hate even having to think about all this stuff, let alone trying to calculate all this stuff myself, so I get my accountant to do it for me. He charges me £1.50 per wage slip and I just write the cheques. What could be simpler, I email my staff hours to him and he emails the wage slips to me. He takes care of all the other stuff, including operating the HMRC real time notification and I just print out the wage slips and get on with being a framer and restorer.

Sorted!

Thanks Kev for the clarification. It's been a while since I did this.

You could of course not tell anybody.

Thanks for the advice everyone, all a bit of "stuff n nonsense" for someone who just wants to make frames all day I'll pay a visit to my Accountant I think, let him earn his money, far too complicated for me.

In 2000 when I was up the smoke, we had an IT contractor join our team, he left the company in 2012 and he was still a "contractor", that's some contract ! No idea how he managed to wangle that with HMRC ??!!

Thanks again,
Adam/Bagpuss

we all forgot one thing:
the employment allowance which now removes the first £2,000 off the employers' national insurance contributions.
bargain

It will depend upon the hourly rate of pay, but at only 6 hours per week I would assume that there won't be any NI to be paid.

I don't know what the exact threshold figure is for paying NI, but neither of my staff are incurring NI and this is even when one of my staff is working 9 hours per week.

I'd recommend popping into your local citizen's advice bureau.

My colleagues brother is self employed freelancer working for Orange/EE mobile.
He uses all their equipment / offices and is still classed as self employed.