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shindigger

When Is A Freelancer An Employee?

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Have been freelancing as a conference av tech since 1997. When i started out i had about 8 clients. As the years have rolled by ive whittled this down to pretty much one. This is a result of them being very happy with my work and me being happy to be there. Simple enough.

Im not engaged 5 days a week, around 3.5 on average, but if anything, has dropped off somewhat in the last 18 months, but still enough to keep me going. I also do no work in July in to August (6 weeks) and virtually nothing for a month either side of xmas.

Last week i got presented with a contract (on the advice of my clients auditors) to reaffirm my position as a freelancer. The contract has a clause which states that i will basically indemnify the client against any retrospective claim from the IR if i was ever to be deemed an employee.

Now, its one thing to have to balance up my OWN tax affairs should tbat happen but i feel quite another to be held responsible for their NI costs etc, which could go back a few years.

Given that i am not engaged 5 days a week, and have large chunks of seasonal down time, would i have any problems holding on to/demonstrating my current self employed status?

Does my client have any right to insist on me covering their back as a result of any IR Stasi purge?

Cos im really not happy signing this. They dont want to employ me as the conference industry is patchy right now and i dont really want to be an empoyee anyway. I get no BUPA, no pension, but im still happy managing my own affairs.

Perhaps the IR would prefer it if all sole traders claimed the beno instead.

Any pointers HPCers?

Cheers

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Off my head the HMRC tests are:

You own your own equipment.

You can refuse work.

You have more than one client.

Your work pattern is not fixed.

Your work place varies.

The biggies are ability to refuse work and more than one client. If you fit this criteria then you have a good case of not being an employee. Since you work for one person you are in effect a disguised employee.

However if you work for one person, who you cannot refuse who you do a 9-5 for then you are an employee. Tbh since you're paying class 2 and class 4 and income tax, the only person to get into trouble would be your employer who has to pay the class 1 NIC of 13.8%

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Off my head the HMRC tests are:

You own your own equipment.

You can refuse work.

You have more than one client.

Your work pattern is not fixed.

Your work place varies.

The biggies are ability to refuse work and more than one client. If you fit this criteria then you have a good case of not being an employee. Since you work for one person you are in effect a disguised employee.

However if you work for one person, who you cannot refuse who you do a 9-5 for then you are an employee. Tbh since you're paying class 2 and class 4 and income tax, the only person to get into trouble would be your employer who has to pay the class 1 NIC of 13.8%

Thanks Ken, that was quick. yes im paid up class 2 and class 4 with my tax, or is it the other way round. I also hire the odd bit of gear to them sometimes.

I can refuse work no problem, i regularly dep it out to one of my best friends, or i get the venue manager to swap days out.

Especially after ive played cricket and cant walk for two days. :)

Would any of this apply retrospectively and how far back could they go?

Im actually on the verge of saying ****** it and playing golf all summer, this could get sticky.

I aint signing.

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Thanks Ken, that was quick. yes im paid up class 2 and class 4 with my tax, or is it the other way round. I also hire the odd bit of gear to them sometimes.

I can refuse work no problem, i regularly dep it out to one of my best friends, or i get the venue manager to swap days out.

Especially after ive played cricket and cant walk for two days. :)

Would any of this apply retrospectively and how far back could they go?

Im actually on the verge of saying ****** it and playing golf all summer, this could get sticky.

I aint signing.

I'm quick as I don't have to go to work tomorrow (company went bust)

Then the biggest elephant in the room is your small client list, do something even if it makes you lose money for somebody else.

Buddy up with a mate in the same industry write out invoices to each other, they balance off, bingo you work for more than one person ergo you are self employed. This is more common than you think.

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Any pointers HPCers?

Have a look at ### this ### decision from the First Tier Tax Tribunals. This is the reverse situation to yours. This was an appeal by cruise ship entertainers who submitted tax returns on the basis they were employees but HMRC wanted to treat them as self employed.

If you work through the decision you can see the factors that are taken into account to determine employment status.

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I can refuse work no problem, i regularly dep it out to one of my best friends, or i get the venue manager to swap days out.

Especially after ive played cricket and cant walk for two days. :)

I'm not English. What's that all about - another mysterious subtlety of the game?

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I'm not English. What's that all about - another mysterious subtlety of the game?

Just getting old and out of nick. I'm ok by mid July.

Anything else is pure speculation. Man's game , cricket, the ball hurts. ;)

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Set up a limited company and there will be no doubt about whether your client could be done for your NI contributions. You should be able to take home 80% of your earnings which is probably as good as being self employed. You take most of your pay in dividends so its tax efficient. You will probably need to employ an accountant though at about 1k per year.

Many clients will not deal with the self employed and insist that you are Ltd.

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Set up a limited company and there will be no doubt about whether your client could be done for your NI contributions. You should be able to take home 80% of your earnings which is probably as good as being self employed. You take most of your pay in dividends so its tax efficient. You will probably need to employ an accountant though at about 1k per year.

Many clients will not deal with the self employed and insist that you are Ltd.

Which then brings you within the gamut of IR35. In which case you are pretty much taxed as if you are an employee anyway.

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Thanks Ken, that was quick. yes im paid up class 2 and class 4 with my tax, or is it the other way round. I also hire the odd bit of gear to them sometimes.

I can refuse work no problem, i regularly dep it out to one of my best friends, or i get the venue manager to swap days out.

Especially after ive played cricket and cant walk for two days. :)

Would any of this apply retrospectively and how far back could they go?

Im actually on the verge of saying ****** it and playing golf all summer, this could get sticky.

I aint signing.

I believe that in the UK, like in Australia, the fact that you can deputise the work is generally an indication that you are not an employee, i.e. you have a right of substitution.

However, as said above, it generally helps if you have more than one client.

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From what you've outlined I reckon HMRC would say you should be PAYE.

When it's cropped up in the past I seem to think things as seemingly trivial as having a website promoting what you do, printed business cards or advertising in the trade press being what's tipped the balance on HMRC allowing if.

There's lots of freelancers on here who'll probably know better but, my feeling is the benefits to not being PAYE have diminished significantly. Also the spectre if aggravation with HMRC probably means more employers prefer it that way too.

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I believe that in the UK, like in Australia, the fact that you can deputise the work is generally an indication that you are not an employee, i.e. you have a right of substitution.

However, as said above, it generally helps if you have more than one client.

I also had a 3 month spell about 2 years ago when i was off with inner ear problems and others deputised.

During which time i received zero sick pay etc.

I see "you're only as good as your last job" as being the definition of freelance.

But timeserved IR snooks would doubtless trouble with that concept.

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Have a look at ### this ### decision from the First Tier Tax Tribunals. This is the reverse situation to yours. This was an appeal by cruise ship entertainers who submitted tax returns on the basis they were employees but HMRC wanted to treat them as self employed.

If you work through the decision you can see the factors that are taken into account to determine employment status.

Thanks, that was a bit of a wade and a half.

They claimed seafarers exemption on every penny they earned! No wonder the IR were after em.

I dont feel i'm taking the piss like they were, even though the issues are reversed.

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The contract has a clause which states that i will basically indemnify the client against any retrospective claim from the IR if i was ever to be deemed an employee.

Which could also mean they have been contacted by the IR and are facing the prospect of a huge bill. Quick, get the sucker to sign up so we can pass it on.

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Which then brings you within the gamut of IR35. In which case you are pretty much taxed as if you are an employee anyway.

The way shindigger describes his business, there's no way he would be captured by ir35. Sounds like a genuine business to me.

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Shameless bump mode.

In the course of my googling it also looks like i may fall foul of the 24 month rule re travel expenses claims to the same client.

And the 40% rule therein.

Does a Sole Trader have any exemption to this? Does it just affect those with Ltd Cos in IR35? As far as i can see, i'm caught by this too.

Which given that my weekly commute is in 2 stages Dorset -London by car start and end of week, then suburbs to central London by train during the week, a fair chunk of deductables are about to go south.

I guess i could mitigate this by upping my daily rate if my client doesnt want to employ me?

As has been mentioned, its looking less and less like its worth being freelance these days.

I know i'll go on the ******ing sick shall i?

There is diminishing incentive here in spades.

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As has been mentioned, its looking less and less like its worth being freelance these days.

I know i'll go on the ******ing sick shall i?

There is diminishing incentive here in spades.

As said I've mentioned the solution already, find another person or three to swap invoices with, you invoice him, he invoices you. When challenged by HMRC about the one client rule clearly there is some trading with somebdoy else..

You'd be surprised at how common this actually is.

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As said I've mentioned the solution already, find another person or three to swap invoices with, you invoice him, he invoices you. When challenged by HMRC about the one client rule clearly there is some trading with somebdoy else..

You'd be surprised at how common this actually is.

Hi Ken

So are you saying if i deploy the above tactic and satisfy self employed criteria, that the 24 month rule is null and void as i have reaffirmed my self employed status?

Thanks for your continued interest!

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Where is your accountant in all of this?

Thats a good question, most of this will be discussed with them on Monday.

I'm just doing a bit of background research.

Though it must be said they are of the "ah that'll be ok" variety.

Im not overly impressed with them at the moment.

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Thats a good question, most of this will be discussed with them on Monday.

I'm just doing a bit of background research.

Though it must be said they are of the "ah that'll be ok" variety.

Im not overly impressed with them at the moment.

I know a good accountant (not me btw) if you're interested.

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  • 284 Brexit, House prices and Summer 2020

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