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Working for recent employer on freelance basis - tax implications?

(19 Posts)
Walkinthecountry Mon 26-Oct-15 23:03:36

Has anyone else run into problems when working for a recent employer on a freelance basis?

I've just been told by my previous employer that working for them as a freelancer "has tax implications" and that they are reviewing what this means for our relationship, with the implication that a period of time will need to pass before I can work for them on a freelance basis.

I've googled and searched the forums here, but can see no reason why this might be the case. In fact, I've actually found a number of blogs and articles suggesting how your current employer should be your first freelance client.

They've offered me a couple of large pieces of work recently, and I'm currently in the middle of one of them, so it's particularly frustrating.

Many thanks in advance for any advice/experience shared.

Floundering Mon 26-Oct-15 23:06:17

I think a long as you work for more than one or two clients, it's Self Emp, otherwise it's employment. You can be both. Look at the HMRC website lots of advice there.

balletgirlmum Mon 26-Oct-15 23:09:50

Basically HMRC are cracking down on self employed people who they think should be employed.

I work for a construction firm & we have had to really watch how we use our sub contractors. They have to fulfil strict criteria to prove they are genuinely self employed & it's us the company that would be hit with a bill for back tax & employer NI contributions.

So they are probably just covering their back to make sure hmrc don't come nosying.

Walkinthecountry Tue 27-Oct-15 09:00:39

Thanks ballet and Floundering for your responses. I can prove that I'm working for more than one client, so it shouldn't be a problem from that perspective; but they've not asked me to supply this information yet. Do you think I should approach HMRC directly or, as its my previous employer that's affected, should I provide information to them?

TalkinPease Tue 27-Oct-15 13:28:22

THe Badges of employment tests are the key.
If the work is controlled by you
then its self employment
if its controlled by them
its self employment

eg
can you get other people to do parts of the work?
can you decide when and where you work?

Floundering Tue 27-Oct-15 14:47:21

Aha this was what I was looking for...
[ ttps://www.gov.uk/working-for-yourself/what-counts-as-self-employed linky]

LonnyVonnyWilsonFrickett Tue 27-Oct-15 14:49:15

Anecdotally I've heard HMRC are cracking down on companies who use freelancers as perm staff to avoid paying NI and all that. But assuming they aren't doing that, then there aren't any 'tax implications'.

Send them Floundering's link and ask them how they think your work doesn't count as SE?

LonnyVonnyWilsonFrickett Tue 27-Oct-15 14:50:10

Oh, unless you were made redundant? My old company now does have a rule about employees who got a payout being used as freelancers... but again, that's not tax-driven.

Walkinthecountry Tue 27-Oct-15 17:04:44

To update (and with thanks for all of the responses), I responded to them to state clearly that:

1. I have other clients
2. I was not made redundant and have received no severance payment from them
3. The work that I'm doing for them on a freelance basis is different to the work I was doing when employed by them.

They came back to say "the rules changed in July this year, in that we can no longer take on new freelancers who have worked for the company"

I left work in August and was accepted onto their freelancer database in September. They have said that I will be paid for completing the job that I"m currently doing, but it's now looking as though they will never let me work for them on a freelance basis again. Really puzzling. Even more so because the contact I have been speaking to says it's really going to leave them in the lurch because some of their best freelancers are ex-employees, and so it sounds as though no matter when you started freelancing for them if you're an ex-employee you'll no longer be able to.

I've asked for clarification if it's HMRC rules, or the company's rules that changed in July. The company is particularly poor with regard to HR and admin (despite being a multinational with several offices in the UK), so I wouldn't put it past them to have made up their own "rule" that they are trying to pass off as HMRC.

SimLondon Wed 28-Oct-15 14:56:08

Is the work that your doing really different? in the event of an investigation could your employer confirm to hmrc that it is and would they also confirm that you have direction and control not them? in practise could you put a substitute worker in your place?

there was a consultation started in the summer around this and some rules regarding expenses are actually due to change, but the thing they are consulting on is that hmrc would like to assume that all single director ltd companies e.g freelancers are disguised employees and they want to be able to make the assumption that they are all inside ir35 and subject to the same tax and ni as a perm employee.

LonnyVonnyWilsonFrickett Wed 28-Oct-15 16:42:54

Crikey Sim is that right? shock.

TalkinPease Wed 28-Oct-15 16:44:37

there was a consultation started in the summer around this and some rules regarding expenses are actually due to change, but the thing they are consulting on is that hmrc would like to assume that all single director ltd companies e.g freelancers are disguised employees and they want to be able to make the assumption that they are all inside ir35 and subject to the same tax and ni as a perm employee.

Link please as I did not see that one on my trade press
other than kite flying by a wonk

TalkinPease Wed 28-Oct-15 17:08:23

Ah, its this one
www.gov.uk/government/uploads/system/uploads/attachment_data/file/446242/Intermediaries_legislation_IR35-discussion_document.pdf

THey will bury it

SimLondon Wed 28-Oct-15 17:47:29

Do you think? I'm waiting to hear if the autumn statement sheds any light - with that and the changes to dividends from next year and the loss of the Employers NI allowance it could be potentially quite a serious financial hit for the personal service companies e.g freelancers.

TalkinPease Wed 28-Oct-15 17:52:59

Simlondon
Do you read the UKBF?
Its an interesting place with lots of analytical people.

The summer statement was full of utter and complete crap

Gideon has just had a VERY bloody nose for trying to sneak a finance change through on an SI instead of a Bill

THe autumn statement will be interesting - and hopefully the posh wonks at the treasury will be a tad less know it all than usual
the views of a civil servant from a different department about them recently were unprintable

SimLondon Wed 28-Oct-15 18:14:56

I don't read UKBF no - and I really really hope your right about them burying them IR35 consultation outcome. But the changes regarding travel and subsistence are coming in from next April, I can't see them changing their minds about the dividend changes next year either - so with those and the loss of employers NI allowance (unless you can recommend a simple way round that?) then even without IR35 changes freelancers are going to be taking quite a hit next year.

32ndfloorandabitdizzy Thu 29-Oct-15 05:21:56

I had a full IR35 tax investigation. Even with immediate full disclosure it took over 2 years. It was one of a number of test cases in my field, some of the others either didn't disclose fully (just answered specific ?S) or didn't engage- their cases took even longer and cost more but in the end everyone was declared outside IR35.

It isn't as simple as having 2 clients, it is about your working practice.

SimLondon Sun 08-Nov-15 10:10:26

Guardian article - crackdown on personal service companies
www.theguardian.com/politics/2015/nov/06/crackdown-on-personal-service-companies-could-raise-400m-in-tax

kjwh Sun 08-Nov-15 12:03:32

Lots of misinformation.

IR35 and personal service limited companies is completely different to the employment versus self employment for a sole trader, so all the recent announcements re IR35 can be safely ignored unless the OP operates via a limited company.

Nothing has changed this year about sole traders.

Having more than one "employer" is about the least important factor. Working for more than one person isn't an important factor at all.

The HMRC "employment status indicator" is all that matters. Work through that.

But at the end of the day, if the OP's former employer has decided not to use the OP, then the OP needs to move on to other clients. It's their decision and if they're risk-averse and havn't properly researched, I can't see how the OP can make them continue the relationship.

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