We have recently opened a new coffee shop and the Manager we have hired has requested to be paid as Self-Employed. The wages were paid to the rest of the staff as they are classed as employed by us, but the Manager is yet to provide us with her self-employment details - can we still pay her the gross wages even though we have no details through yet for her self-employed status?
The big query/worry is that if we go ahead and pay the Manager without the details and they end up not coming through, are we liable for non-compliance in regards to PAYE?
Any help is greatly appreciated.
Replies (15)
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Why do you (and she) think she is not employed?!?
No. To answer your question.
You will be liable for the grossed up amount ie treating what you pay her as the net.
You will probably have heard of something called IR35.
If this manager is working in your coffee shop regularly, and only working for you. If you tell the manager what hours they will work, what days they will work, and they wear for example your uniform, and have to ask you permission to take 2 weeks holiday over Christmas etc etc. They will be classed as an employee, and should be paid as such.
If this person or you are ever investigated, I would imagine that you 'being viewed as the employer', will be liable for paying over the tax and NI to HMRC that would have been paid as the previous comment made (for example), if you pay £307.12 in the week to your manager as a 'self-employed person' and it is later proven by HMRC that they were in fact employed, it will have been deemed that you paid £380 Gross, thereby owing HMRC £72.88 each week that they worked for you. (These figures are based on current rates on a normal tax code of 810L. with no other income)
Hope this is of some assistance to you.
Caspar
You could always do a BBC ...
... tell her to form a company and bill you - then it is her problem!
If you have heard of IR5
and know anything about it you will know that it doesn't apply to individuals.
not a choice
It is a question of the facts, not a choice, whether or not someone is employed and there is a huge amount of case law on the subject. I would be most surprised if a permanently employed coffee shop manager would ever fall to be treated as anything other than employed (and by the way the recent high profile cases at BBC etc involve people providing services via a limited company).
There is a "status checker" on HMRC website and I would recommend you run the circumstances through that if you cannot otherwise convince this individual to be an employee.
http://www.hmrc.gov.uk/calcs/esi.htm
Incidentally in my experience it is usually the "employer" at the more modest end of the salary market who asks for the "employee" to "pay their own tax". To find someone coming along suggesting this makes me wonder if they are rather hoping to avoid paying the tax at all......
Which is ...
(and by the way the recent high profile cases at BBC etc involve people providing services via a limited company).
.
... what I said!
Employed
As mentioned above neither you nor her get to decide whether she is employed or self employed, you must look at the facts.
As a manager, she will control other staff, which she will do on your behalf, as the owner, this is a major indicator of employment and will be used by HMRC in the event of an intervention by them.
I would get her on the payroll now and deduct both tax and NI, dont forget HMRC will not just ask you to pay the lost tax and NI they will also fine you for not correctly operating PAYE, these fines can be large.
Incidentally, what details are you expecting her to provide that will suggest she has a self employed status?
Agree with other comments
I think this engagement is likely to fail most tests of self-employment. Self employment isn't something that the worker "proves" with a document. It is determined by the facts of the relationship between the worker and whoever they are working for.
As already stated a manager supervises employees. Supervising and/or being supervised are both major employment indicators. Furthermore I very much doubt that you'd allow this person to send a substitute along if they were working elsewhere one week.
Kill two birds
Run the coffee shop as an LLP and make the manager a member on a fixed profit share. She won't be an employee then, and you'll know that she's been registered as self-employed.
@steve kesby
The manager would have to put all of her "dodgy" expenses through the LLP then.
Oh my God
How cld anyone claim this? Does she have any other jobs, has she set up a ltd co? No way in hell is she self-employed. Start deducting tax and back-date it immediately. What an absolute abuse!
She's Having a Tin Bath!
As my children would say, she's having a Tin Bath (laugh).
Its you the 'employer' that will be at serious risk, if and when HMRC, blow this payment method out of the water.
Perhaps a Contrct for Services, might help, but this is pretty blantant and could in in tears for you.
Self employed manager
The chances of this person being treated as self employed by HMRC is about remote as Scotland qualifying for World Cup in Brazil!!!!!!!
If I were you,I would look for a new manager because any long term relationship with the current incumbent will end in tears(all yours!!!!!!)
Shay