Potential UK client has been working as self-employed for an american company as IT consultant, this is only source of income, he has a direct contract with the company. He has just finished contract lasted 6 months and has approached to get advice on sorting tax out for following year. The company does not have uk presence.
He should have been on paye, is my initial response but that has not happened and neither the american company has put him through payroll.
Therefore, to sort the taxes out i would go the self-employed route, what are others thought?
appreciate comments
thank you
Replies (5)
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Where does he work ?
As it is an American Company with no UK presence paye is not relevant.
PAYE obligation
Assuming it was an employment then PAYE is appropriate. Broadly, in the circumstances you describe, a special scheme is usually set up by HMRC and operated by the employee who accounts for their tax and NI, but usually not employer's NI.
5 April 2014 tax return?
Let me guess… this would be a 5 April 2014 tax return due within a week?
Sounds interesting nether-the-less!
I would be looking with the client at the Employment Status Indicator on the HMRC website. The facts and contract between the parties would be material to know about.
The indicator tool looks to still be on the HMRC website at: https://esi2calculator.hmrc.gov.uk/esi/app/index.html
I would also quickly crunch the numbers to see the difference in taxes between the options. I appreciate this may sway the desired outcome but shows the materiality.
What is the problem?
He had a 6-month contract as a self-employed IT consultant in the 2014/15 tax year. If he hasn't already registered as self-employed and to pay Class 2 NIC, do it now online. If he has now ceased self-employment, tell HMRC online.
Don't agonise over whether he should have been an employee, registered for a DPNI PAYE scheme, etc. - just go with the flow and treat him as self-employed. When a 2015 tax return is issued, complete the self-employment pages.