Engaged as self employed but treated like an employee

[dontletthem]

I have been employed on a freelance basis for a few months (and paid an agreed amount monthly) but according to HMRC's online tool I believe I am really an employee. The period of work is now coming to an end and there is a dispute developing that could result in me not being paid the full amount that was agreed. My question is, should I actually be classed as an employee, is the company responsible for PAYE and NIC or is it me. Also, has the company in question been breaking the law? Thanks for any help.

[teaboy2]

Re: Engaged as self employed but treated like an employee

Hi Dontletthem

Your going to have to provide more details as to why you think your employed and not self employed, as you say you have been working freelance which is self employed - but fail to state why you actually think your employed. So on what you said so far we have nothing to go on so can not say either way.

As for PAYE, this is only paid to employees, as a self employed person your pay is just simply contractual remuneration paid to you for your service under contract - Same as a builder being paid for building work by a member of the public. National insurance contributions are only paid for by the employer if your an employee, if your self-employed you pay your own national insurance contributions.

[wales01man]

Re: Engaged as self employed but treated like an employee

Were you content to be paid Gross pay without the deductions those directly employed had ?
Being self employed has some advantages and many disadvantages
Were you registered as self employed with HMRC?

[bluebottle]

Re: Engaged as self employed but treated like an employee

If you are self-employed, you are responsible for paying Class 2 NI contributions and self-assessment for Income Tax. To be self-employed, you must work for more than one employer and be free to do so. You cannot be employed in a self-employed capacity by one employer and be prevented from working for other employers as well. That is Nominal Self-Employment and HMRC take an exceedingly dim view of employers who engage in that sort of practice.

You say you are freelance and there are freelance schemes in operation, but these are mainly in the film, television and entertainment industries. If you are in one of these industries, then speak to BECTU or Equity, if you are a member of either of these trade unions. If not, I would advise that you contact HMRC for guidance. They are not the ogres they are made out to be and I have always found them to be very helpful on tax and VAT matters, provided you contact them before you get yourself into a pickle and they do not have to come in and sort things out.

If you have the telephone number for the tax office that deals with your tax affairs, give them a call and talk to them about your concerns.

[dontletthem]

Re: Engaged as self employed but treated like an employee

Thanks for your response. HMRC has a tool which determines whether you are an employee or are self employed. Based on the work I've been doing and the way I have been paid, the tool suggests that my status should be an employee and not self employed.

[dontletthem]

Re: Engaged as self employed but treated like an employee

Thanks bluebottle, I will call HMRC tomorrow. My question is, has the company been acting illegally by treating me as self employed and thus avoiding PAYE and NIC obligations when my role would normally be classed as being an employee. I don't think companies can choose the status otherwise everyone would be taken on as self employed.

[teaboy2]

Re: Engaged as self employed but treated like an employee

Thanks bluebottle, I will call HMRC tomorrow. My question is, has the company been acting illegally by treating me as self employed and thus avoiding PAYE and NIC obligations when my role would normally be classed as being an employee. I don't think companies can choose the status otherwise everyone would be taken on as self employed.

You may find that the tool is merely just that, it is neither wrong or right without knowing the terms of your contract.

If your self employed then your likely contracted to provide the company your working for a service for a fixed period or until completion of a project or even mutual termination, then you move on to another contract to provide a service with a different company or even the same company if they require more of your services. You stated in your first post the contract was about to end soon. So it really actually boils down to the terms in your contract not whether your working for just one company at this moment in time.

I had people working from home for my company on self employed basis, who didn't provide work for other companies and just mine, though they were free to work however many or as few hours they wished and were paid a percentage of profit from sales they made, therefore it was up to them how many hours they worked. And in effect had there own business where we provided the products and paid them a cut in the profits for each item they sold that was not returned to us by the customer.

So the key to your answer here, is not the HMRC tool, but the terms in the contract itself. The last thing you want to do is take the Tool as being correct and HMRC as being correct only for the company your contracted to to sue you and for a judge to rule the contract as valid and perfectly legal. So be careful!

[bluebottle]

Re: Engaged as self employed but treated like an employee

I agree with TB about the Tool. It is not 100% reliable. You will only get a definitive answer by speaking to a human being at the tax office and that human being is an Inspector of Taxes.

I've come across the model TB describes and as far as I am aware that model is okay. It is not so clear, however, where your current employer is concerned. Certainly, the contract will play a part in determining whether you are an employee or what, but you do need to speak to an Inspector of Taxes at HMRC.