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Are benefits received by self-employed workers taxable?

If a business takes on a worker on a self-employed basis (assume all/ most conditions determining self-employment are met) and then provides a number of benefits e.g. provides a motor vehicle to him/her, pays a pension contribution for him/her and provides free living accommodation to him/her, are some or all or none of these benefits taxable in the hands of that self-employed worker? Assume that the total remuneration including benefits is < £8,500 pa.

Is it correct that no P11D or P9D would be required from the business because the worker was self-employed?

The follow-on question would have to be whether the self-employed worker, while satisfying all the other conditions determining self-employed status, could still be classified as self-employed after receiving benefits such as these?

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Not my field but

I'd have thought that these benefits were part of the consideration for services endered and thus should have a fair value put on them and be taxable in the hands of the s/e person, and possibly Turnover for VAT measurement.

SE status looks dubious in any case let alone after these benefits.

I'll wait for a more expert view - this looks interesting.  

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Self employed benefits

This is interesting.   Whilst I don't have a definitive answer, one thing to do would be to look at the contract between the parties.   What does it say about payment.   If a price is stated, and paid, and benefits paid on top I believe that you may have a real problem.  

If the benefits are included in the total value paid under the contract, then it  seems to me a simple case of satisfaction for work done being paid in an alternative method to direct cash.   The VAT position would need to be checked as would the correct value for the provisionn of the vehicle.

I think you need some more information to determine exactly what is happening before you can reach a conclusion.

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If we compare this self-employed situation with that of an employee, bearing in mind that the total earnings including benefits are below £8,500pa:

1) The employee, even though lowly paid, would have to pay tax on the accommodation; the employer would calculate the benefit and declare it on a P9D. One would assume that the self-employed worker should also pay tax on this but would have no P9D - would he/she have to calculate the benefit and declare it on his/her own SA return? And where would this be shown?

2) The pension contribution would not be taxable for the employee. Would that also apply to the self-employed individual? The employee is entitled to this benefit tax-free - is the self-employed person equally entitled, or is it additional earnings? (Although paid to a 3rd party). And if our self-employed person should pay tax on this, would he not also get tax relief on 'his' contributions? Would they be deemed net or gross?

3) The car benefit would also not be taxable for the employee provided total earnings+benefits were below £8,500. Would that be the same for the self-employed person or not? If the employee tax-free benefit does not translate to a self-employed situation, then how would the self-employed person calculate his taxable benefit? As if he was an employee?! And if this benefit has to be quantified and declared, where would it be shown on the SA return?

 

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Pot Pouri

I know the OP wants to ignore the employment status, but you can't. The P11D rules only apply to employees so you can't use them for a s/e contractor. Yet the provision of these benefits (and I think the pension is the killer) very firmly point you in the direction of employed status. Provision of a vehicle is not unheard of for an s/e contractor, neither is the accomodation but the whole package is much more akin to an employee.

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Point taken on the employment status issue but, continuing to ignore that just for the present and considering each benefit on its own as if it was a stand-alone item, the question remains what should the self-employed person enter, if anything, into his SA return, and where, as regards:

a) free accommodation?

b) pension contributions paid on his behalf?

c) the car provided for his use?

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Any ideas anyone? This may be a bit unusual and tricky but some help would be much appreciated. 

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Not tricky at all

If you are convinced that there is no employment status issue then the answer is that these benefits are barter and form part of the consideration for the work done by the contractor. They should be valued at open market value and treated as income in the hands of the contractor. They are not expenses in employment so the BIK rules for valuation don't apply. If appropriate, they also will attract VAT on their value.

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Right, thanks, that's helpful. You're saying that although low-paid employees can receive some benefits tax-free, low-paid self-employed individuals have no such favour: they must pay tax on all benefits received. Seems unfair to me.

Re the pension contribution, would that have to be grossed up to arrive at OMV? Or would the net contribution (as paid over by the business) be sufficient?

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Low paid employees do get taxed -

That's what the P9D is for.

The £8,500 threshold doesn't only include wages or salary that you pay the employee. You must also include the value of the expenses and benefits they receive from you

These benefits for an employe would probably move them to P11D anyway.

I'd value the accomodation at cost - available from employer

Pension, if paid to a company COMP, GPP or DC/DB scheme probably OK. If paid to your clients specific account it may actually count as pay.

Car- running costs from employer and if leased I'd use these payments, if paid for that cost would be a one off payment.

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Thanks for the advice here, it's appreciated. Remember when the £8,500 pa threshold was to identify higher paid employees? There can be zero full-time  employees who come in below this now. Must apply to part-timers only. Oh well.

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Low paid

Yep,how long has it been since £8,500 was a high salary. Even when i was a boy accountant  nearly 25 years ago this was a joke.

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