DS got a job but told he will be self emoyed - is this legit?

[WitzEnders]

DS (18) has been offered a job by a local builder. Great, he's not academic but is good with his hands and a real grafter.

The boss has told him he will be "self employed" and needs to sort out his own tax and NIC.

I've never been in this position so did a quick Google and I don't think DS meets HMRC criteria for s/e. Is this just a way for his boss to avoid paying employers NI, holidays and pension?

Any advice would be much appreciated.

@icedcoffees

Yes you are technically free to take days and time off, but if you're supplying labour to a builder etc and keep deciding to take time or days off of your choosing, you're at risk of finding that they might decide to stop taking your services which they can do with no notice or reason, because you don't have any employment rights because you're 'self employed'.

It is shit and while some people might be lucky in that they can always find work when they need it, and it's at a decent rate of pay, there's no proper security and you can quickly find yourself out of work in times when the building trade isn't booming like it is now.

My dp has had 2 jobs like this now, although the companies do actually take tax off his wages to put into a tax account. Both companies have had an account that do the guys tax returns at the end of the year for a fee. They have the option of doing their own obviously, bit most prefer to just let the accountants and then their tax bill gets paid using the money in the tax account.
At first I wasn't keen on this arrangement, as I'm self employed and I just couldn't really get my head around it, but it's always worked out fine.

@icedcoffees perhaps that’s how it worked for you but sadly for most it’s just not the case. If my DH and his colleagues behaved like that they would’ve lost their jobs. They had set hours and had no choice when it came to what jobs to do. They were told where to be and what to do. They didn’t get to pick and choose. It sounds like your DH is a legitimate CIS contractor but my point is that most of the time the scheme is used incorrectly and people are working under disguised employment.

OP, if your DS decides to go down this route, which could be a good thing for him to learn a trade and earn decent money without being academic (once he gets more experience, he could start his own firm etc) but he needs to make sure he fully understands the whole CIS/SE system and make sure he knows where he is with tax - CIS takes 20%, which will cover what he owes until he earns around £25k a year, but there will be NI to pay on top and if he earns more than £25k, he needs to save extra to pay more tax and NI.

He needs to register with the CIS scheme, and as self employed, and do a tax return on time each year or else he will be fined heavily.

He also needs to start his own pension as there's no employer's pension and he will get tax relief on this. He needs to put 10-20% of his earnings into his pension.

He should also save some money in case he can't work if he's sick, injured, the weather is bad, or his 'employer' has no work for him or the site he's working on is closed, eg it could close for 2 weeks at Christmas.

So counting tax, NI, pension and some money to cover times when he's not earning, he should regard only around 50-60% or so of the gross money he gets paid to be available to him to actually spend.

[quote CovidIsADick]@icedcoffees perhaps that’s how it worked for you but sadly for most it’s just not the case. If my DH and his colleagues behaved like that they would’ve lost their jobs. They had set hours and had no choice when it came to what jobs to do. They were told where to be and what to do. They didn’t get to pick and choose. It sounds like your DH is a legitimate CIS contractor but my point is that most of the time the scheme is used incorrectly and people are working under disguised employment.[/quote]
People may use the scheme incorrectly - and I don't disagree that it happens - but that still doesn't mean that the scheme itself is a bad idea.

DH can take days off as and when he chooses. He doesn't have set hours or times. He's asked to do various jobs but is totally free to turn them down if he wishes. So yes, he has a lot of flexibility, but at the same time, he's often worked late/gone on to site at weekends to get jobs done - it works both ways for him.

They keep him on because he is excellent at his job - so if he needs a last-minute day off to sort his car (or whatever) they allow it because he more than makes up for it the rest of the time.

The fact that some people use the CIS scheme in the wrong way doesn't change the fact that it still works really well for many people.

There's also always the risk that HMRC will crack down on the construction industry because while it is widespread, most of the jobbing builders, machine drivers and other tradespeople don't meet the true SE definition. Just like they've done with IT contractors etc with IR35.

Its very common my friend is a nursery nurse and she had this arrangement too

How on earth can a nursery nurse be self employed?

@icedcoffees if you go back and read my first post I said that the scheme is great when used correctly. I don’t disagree with you.

My point is that most of the time it is not used correctly. The vast majority of contractors use the scheme as a way to dodge their responsibilities as an employer. I am not just making wild claims without proof, I have been dealing with this for the last two years. It is a well known fact and there are thousands of people out there who are being exploited.

@BarbaraofSeville There's also always the risk that HMRC will crack down on the construction industry because while it is widespread, most of the jobbing builders, machine drivers and other tradespeople don't meet the true SE definition. Just like they've done with IT contractors etc with IR35.

IMO this can’t happen soon enough.

@icedcoffees Also, if you read the OP’s first post again, she has reason to believe that her son doesn’t fit the criteria to be considered a self employed CIS contractor. Her son is most likely yet another person about to be exploited by a tax dodging contractor.