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Employed or Self Employed?

Would I be best working as employed or self employed?

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I am an accountant and have recently moved to industry from practice. A friend has approached me asking me to look after his bookkeeping/payroll/accounts alongside my job. This is someone I have worked with before and I am very happy to do the work. It is work I enjoy, it's not a huge time commitment (maybe an hour or two a week?) which I have time for. He doesn't care when it's done as long as things are filed on time. So I have absolutely no concerns about accepting the work. There is also nothing in my current contract preventing me from doing it and my employer is more than happy for me to do what I like as long as it doesn't affect them (I have a couple of other income streams that are not accounts related).

The "client" has said he is happy to take me on as an employee or for me to be self employed and do the work. He will do whatever works for me.

From a tax / NIC perspective it makes no difference. It will be under the NIC threshold and the tax will either be collected monthly through paye or annually on a tax return. I already prepare a tax return due to other sources of income.

The issues I have identified are that if I am self employed I will need to register for money laundering supervision even if its only one client. I could also have issues with my professional body as I don't hold a practicing certificate. If I'm employed neither of these are an issue.

Obviously employment brings benefits and protections, however neither he nor I much care about those. He would pay me a monthly rate either way and would want me to do the work as long as I am happy to do it. It would be a small supplemental income that I don't need, so the added protections of being an employee are irrelevant to me.

I've thought about the tests of employment and really it could be argued either way. He would be paying me to do the work (employment) however I have no one I would pass the work to so in a way it would be hard to assess whether I have the right of substitution (self employed). I can't imagine he would know or care if I paid someone else to do it, but I wouldn't. The deadlines are set by companies house and HMRC so you could argue either way as to whether he is controlling my work or they are. Either self employed or employed I'd be expected to meet those deadlines. The only "tool" I would need to do the work is a laptop that he bought me several months ago as a gift (it was a congrats on the new job gift), so you could argue I'm using my own equipment or equipment he's provided. In terms of holiday pay etc, he's paying a set rate regardless of hours spent so if I take a week off I'll still get paid, he just wants the work done.

As far as I can tell, for such a small amount it doesn't matter either way so I'm edging on being employed to avoid the admin burden of money laundering supervision and potential issues with what services I can provide without a practicing certificate. I also think with only one "client" it's probably more of a second employment than being self employed. Are there any other issues I should consider? Would anyone argue that I should definitely be self employed? I do not intend to take on other clients. I'm only doing it because I enjoy the work, really enjoy working with him and it's not going to be a hassle. 

Replies (18)

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By Paul Crowley
04th Jul 2020 21:40

Employed
His problem if things go wrong.

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By paul.benny
04th Jul 2020 21:50

Employed
You can't provide accountancy services without a practising certificate. Check the regulations if your professional body

Thanks (4)
Replying to paul.benny:
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By rocket_queen
04th Jul 2020 22:01

I'm not 100% sure but I think I can still do bookkeeping. Not sure on payroll? The VAT he could press the button once I've done the bookkeeping. So, I think I could do most of it, not the year end, but I have contacts in practice who would do it for a low fee if I was bookkeeping it as they know my work. But, I'm definitely feeling employed is the better choice.

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Replying to rocket_queen:
RLI
By lionofludesch
06th Jul 2020 03:24

rocket_queen wrote:

I'm not 100% sure but I think I can still do bookkeeping. Not sure on payroll? The VAT he could press the button once I've done the bookkeeping.

For the avoidance of doubt, you think wrong.

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Replying to lionofludesch:
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By rocket_queen
06th Jul 2020 07:16

There's an ACCA factsheet that says you can, but the scope is limited ie I can record data to TB stage but not interpret it, I can generate VAT returns but not advise on VAT rates.

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By jonharris999
05th Jul 2020 08:46

Employed. It's not just the practising cert, it's liability insurance as well if you are s/e. There's absolutely no point taking on the responsibilities of an s/e practice for one small client.

Thanks (2)
Replying to jonharris999:
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By memyself-eye
05th Jul 2020 10:47

..and the MLR registration at £300 a pop.

Thanks (1)
DougScott
By Dougscott
05th Jul 2020 09:15

Employed, you know it makes sense! I have full-time employment and about 15 small clients that I serve through a limited company. It keeps my hand in to the world of practice but it is becoming an increasing hassle.

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By rocket_queen
05th Jul 2020 09:39

Thanks everyone. I felt employed was the right choice. Unless anyone has any great arguments for self employed then I'll stick with employment. It's what I'm used to anyway!

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By Tax Dragon
06th Jul 2020 06:57

Have you thought about not doing the work at all?

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Replying to Tax Dragon:
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By rocket_queen
06th Jul 2020 07:21

Not really. I liken it to the manager who misses the shop floor. I love what I do now, but miss the simplicity of the days when I had a small client who I did everything for. The satisfaction of reconciling the bank and processing the invoices. It's a bit of fun that won't take much time for someone who will genuinely appreciate my efforts and pay me for them. Would seem daft to turn it down. I'd probably do it for free rather than that.

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Replying to rocket_queen:
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By Tax Dragon
06th Jul 2020 08:32

rocket_queen wrote:

It's a bit of fun....

Yup, that's how the regulators see it too.

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Replying to Tax Dragon:
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By rocket_queen
06th Jul 2020 09:34

What regulator are you thinking of? HMRC? It would be below the LEL for NIC, and tax would be the same under PAYE or SA. I've already noted that ML supervision would be necessary if SE.

ACCA? Their guidelines say I can provide bookkeeping services which are the basic recording or transactions, but cannot make management decisions or provide advice. I've already said that if I went the SE route I would need to get an accountant to do the year end, but with a good set of records that would be inexpensive as I know local firms I have worked for who are familiar with my work.

Is there another regulator you are thinking of or something I've missed because if so, that's exactly why I asked the question, to ensure I had thought of everything and wasn't going to end up doing something I shouldn't through ignorance.

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Replying to rocket_queen:
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By Tax Dragon
06th Jul 2020 10:18

Let me put it to you that you will (on the facts) be self employed, factors pointing that way including that you can choose where, when and how you will do the work and that you will be doing the work on your own equipment.

Just for interest(*), run it through CEST and let us know what it says.

(*) or do I mean "fun"?

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By SXGuy
06th Jul 2020 07:17

No ones mentioned the fact it would be desguised employment anyway since you'd be working for 1 person only.

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Replying to SXGuy:
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By Tax Dragon
06th Jul 2020 08:37

No-one's mentioned it, because that's complete cobblers. Say I work behind 5 different bars on 5 different days of the week. Have I become a self employed bar steward, or do I have 5 employments?

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By sweetex
14th Jul 2020 10:01

If you don't need the money, why not ask him to pay your 'salary' into a SIPP?

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By Andy Reeves
14th Jul 2020 16:51

One plus for self-employment would be the £1k trading expense allowance. Probably doesn't make up for the ML regulation fees or PII costs though. Trading via a company means you lose out on the £1k expense, but makes PII less of an issue - at least the cost of it.

If he is happy to employ you, go that route without a doubt, then all of the risk is with him.

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