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Peculiar NI treatment for Self Employed cleaners

Peculiar NI treatment for Self Employed cleaners

 A client of ours, a cleaning company, has recently been visited by HMRC, with the main intention of their visit appearing to be to ensure that self employed cleaners are indeed self employed, rather than being employees. This client has a number (a majority, even) of employees, but also uses a few sub-contractor self employed cleaners. HMRC have, it would appear, agreed that these latter individuals are correctly treated as being self employed.

However, the inspector has now pointed the client to HMRC guidance ESM4018 which refers to the NI treatment of self-employed sub-contractors who provide cleaning services on behalf of a contractor, and the guidance seems to state quite plainly that, even though being self-employed, the contractor is required to treat them as employees as far as National Insurance is concerned, though not for tax.

How does this work in practice, and are there any arguments against adopting this treatment?

Any answers greatly received. 

Mike.

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06th May 2011 09:34

As for teachers, sports coaches, entertainers

The categorisation of earners regulations affect a number of specific professions, as well as workers supplied through agencies.  I've had involvement with this with respect to ad-hoc teaching staff, such as sports coaches, dance teachers, etc. and some entertainers.

From the "employer's" perspective payments are processed through payroll with an NT code.  For the worker, accounts and tax returns are prepared in the usual way and there's a box in the self-employed pages to adjust the profit for Class 4 NIC purposes in order to remove the income that has had Class 1 deductions applied.

There are no arguments against applying it as it's law.  For some of the professions there are specific exceptions that can be used to structure arrangements so that the regulations don't apply.  Unfortunately, in the case of cleaners there are no exceptions.

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06th May 2011 10:54

Twist in the tale

 Thank you Ernest N.

Now, at the foot of the guidance at ESM4018 it says "Where the cleaning is merely incidental to running a cleaning business e.g. working alongside or temporary replacing other employed cleaners of the business then they would not be subject to the legislation."

These subcontractors do indeed work alongside employed cleaners. There are about a dozen self-employed cleaners and about 70 employee cleaners on the payroll, they work on the same sites at the same time, and the self-employed individuals are used to cover (temporarily) for some the employees where necessary. So can we therefore argue with confidence that the self-employed subcontractors are 'merely incidental' to the running of c cleaning business?

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06th May 2011 11:35

Not sure

HMRC are paraphrasing the Regulations and that final paragraph tries to put back in the bits they've removed, essentially.

The actual relevant wording from the Regulations is:

"Employment-

(a) as an office cleaner or as an operative in any similar capacity in any premises other than those used as a private dwelling house; or

(b) as a cleaner of any telephone apparatus and associated fixtures other than of apparatus and fixtures in premises used as a private dwelling house."

I don't know exactly what the point is that HMRC are trying to make, but I think it is recognising a distinction between persons (engaged on a self-employed basis) by a business that supplies cleaners to office premises (each individual "premises" engagement falling within the regs) and similar persons engaged by a business that supplies a cleaning service to businesses (one over-arching engagement to unspecified premises falling outside the regs).

I'd agree that in the latter case (engagement in the course of provision of a cleaning service, rather than just provision of cleaners), there's scope to argue (based on the HMRC guidance) that the Regulations don't apply.

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06th May 2011 16:02

From the horse's mouth

And a very helpful individual in HMRC's technical support office has also now confirmed that, indeed, where the self-employed individuals are merely incidental to the running of a cleaning business, as indicated by the existence of a far greater number of employees than self-employed individuals all of whom work together, the legislation does not apply.

Thank you again for your helpful posts. 

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09th May 2011 13:40

Cleaners: Social Security (Categorisation of Earners) Regulation
I would be very wary here. Your helpful HMRC officer may have misunderstood the situation.

The wording of the phrases in the guidance " the Regulations only apply where there is a primary requirement for the cleaner to physically clean the premises or apparatus concerned. Where the cleaning is merely incidental to running a cleaning business e.g. working alongside or temporary replacing other employed cleaners of the business then they would not be subject to the legislation. " needs to be read VERY carefully.

It refers to cases only where a person runs a cleaning business but does not primarily actually perform the cleaning him/herself - and occasionally cleans alongside or replacing other cleaners OF THAT BUSINESS.

In the circumstances you describe, each self employed cleaner is working alongside or replacing employees of a different business - not their own.

I strongly advise you to get written confirmation that the regulations do not apply in your specific circumstances.

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By nelfi
09th May 2011 20:05

What is the cleaner's position

Ok - so from the other side my client is a self-employed cleaner - and I very much doubt that the contractor company he works for are following this guidance  - is there any risk to my client?

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By GeeBee
12th May 2011 13:28

What about cleaning private homes?

I have a client who sends self-employed cleaners to his customers private homes i.e. domestic cleaners.

Is this different? 

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moneymanager
11th Feb 2013 06:31

I guess, that's the illegal way of treating of Home Cleaning.

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19th May 2011 12:46

Private house cleaners are specifically exampted from the regulations.  Otherwise I can't easily see a way round it.  the legislation is designed to allow people to claim certain benefits, particularly Jobseekers' allowance.

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06th Dec 2013 11:52

BUT....

All of the above is lovely, but did nobody think to mention that the usual NIC limits apply - how much does the cleaner get paid is perhaps the first question one should ask.

 

Surely, if the cleaner earns below the primary earnings threshold then no NIC liability will be due?

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