Employee classed as contractor

Employee classed as contractor

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My new company has a couple of employees who are classed as contractors. They have their own company (not limited), but all their time is spent working for my company. They claim mileage allowance on their invoice and any other expenses. They do not claim holiday pay.

However, I feel that they will be treated by HMRC as an employee. What are the repurcussions on the contractor and employer if this is the case?

Thank you

Janette
Sandra Roberts

Replies (4)

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By martinfoley07
15th Aug 2008 22:41

No IR35 involved ......
....given the putative "employees" or "contractors" are not operating through their own limited companies per the OP.

But, that is on the assumption the OP meant that the "employees/contractors" have their own business (as self-employed putatively) rather than have their own company (wording by OP is not beyond doubt) - OP needs to be clear on that before anything else. That is of course central to all subsequent repercussions.

But no idea why OP and her owners/directors are not discussing this with their own accountants?

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By User deleted
15th Aug 2008 11:36

Employment status
If "all their time is spent working for my company" then the Revenue will look at them as employees of your company - you should be deducting PAYE and NIC. This can lead to a very large bill in a short space of time. If you are lucky the Revenue will give you credit for any tax and NIC they have paid, although I do not think they are obligated to do so.

Your own posting calls them "employees" - this suggests that you think of them as such. What factors are present that could refute this?

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By billgilcom
15th Aug 2008 15:03

Urgent
You really need to get this sorted out now as clearly your company will be exposed to having failed to operate PAYE on their wages and any Employer Compliance action will result in you having to pay over the tax plus interest on that tax and then to cap it all a negligence penalty. And don't of course think that you can just liquidate the company and do a phoenix arising from the ashes as you could end up being disqualified from being a director if you mismanage your company's funds....

BTW if employer compliance go for a monetary settlement by way of contract and offer they will usually givce credit for any direct tax paid by your employees. However if they have to go formally by way of determinations there is absolutely no scope for any such concession.

regards and hope that this puts matters in perspective for you.... you need to see a tax advisor and get PAYE operating like from yesterday and undo the wrongs since April as well. What you do about past periods - e.g. closed year to 5th April 2008 is probably discussed with somebody who could guide you through your problem
regards
[email protected]
http://www.wamstaxltd.com

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By Ken Howard
15th Aug 2008 16:24

Not so fast ..............
Hang on a minute. Are you absolutely sure that they won't be self employed?

Just working for one "employer" isn't the only criteria - there are plenty more. Have you looked at the HMRC status indicator on their website?

Even if they are borderline or indications towards employment, is there anything you can mutually agree with them to make their self employment easier to justify - i.e. slight changes to the way they work or their contract? They are just as likely to be keen on keeping their self employment status as you should be as their employer - a little contract renegotiation may well be all that is needed.

There are plenty of good employment status experts around who could give you some proper advice.

For a start, what do their contracts say?

Are they hourly paid or do they get paid upon completion of tasks?

What is the level of control over them by the "employer"?

Are they required to do everything themselves or can they delegate to others?

Do they bear the risks & rewards?

At the very least, you need to be asking the company accountants and/or lawyers for their advice before doing anything at all.

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