They won’t pay me my wages until end of March

[Sparklydiplodocus]

I’ve been freelancing for a company for over a year. After April they wanted me to do a self-declaration for tax, however when I consulted HMRC they said I should be on their payroll as a freelancer and the historic tax/ NI back to April should be paid by the company as they fucked up.

So the company got me to fill the relevant forms in and I started working for them again as of 3 weeks ago. I got an email this morning saying that due to them working out putting me on payroll I won’t be paid until the end of March! AIBU to think this is really unreasonable?!

They also think I should be paying the historic tax and NI and are taking it all out of my wages in March! That’s not what the tax man said!

I don’t know what to do and I’m fuming.

So you’ve been paid as a freelancer but they are retrospectively putting you on payroll if that is the plan (which tbh is quite a dodgy one in the first place), then yes you will have backdated tax and ni to pay but surely you will have a similar amount saved from the payments they’ve made for you to pay it upon self assessment?

Yeah the whole thing is a mess. Basically they asked me to register for self-assessment I phoned the HMRC line to ask how to do it as there were some things I wasn’t sure of, he ran thru a ton of questions and it came out that I should be on their payroll.

This has caused the company to get into a right fluster and now they’re saying I might get put on the emergency tax rate, prob won’t have any of my earnings left when they do eventually pay me at the end of March due to them taking all my historic NI and any tax away… it’s all a shambles. I don’t know what to do.

There is quite a lot of informationon this, the gig ecomomy ha had a few warning shots across its bows. Your employers should be more on the ball than that!

All you can do at this point is keep good notes, dates etc. And at the end of the tax year you can ask HMRC to do an adjustment for you.

@Internetio things have been quite different for self employed over the last couple of years, many of us will have paid our taxes up front (on account, as they call it) and are now expecting to get some of that tax back and have been relying on HMRC figures to eke out reduced income. What @Sparklydiplodocus is facing now is an unexpected upheaval of that. One that could make a huge, if temporary, change to her monthly income.

The organisation of the whole company is often a shambles. I’ve worked my butt off and now I’m stuck with all this mess

A freelancer isn't on a payroll. They submit an invoice and the company pay it. That's how's its worked at every company I know.

@DartmoorChef

A freelancer isn't on a payroll. They submit an invoice and the company pay it. That's how's its worked at every company I know.

Yep. But asking OP to submit a self declaration, after a year, suggests that the compnay have been a tad 'shonky'.

I would assume she has been paid a standard rate every month and now they want/need something else for their paperwork. That's how many companies have offloaded their fiscal repsonsibilities. And is specifically what the government has been cracking down on,

@Sparklydiplodocus - don't let them forget your pension credits and holiday entitlements!

I would consult citizens advice. A lot of MPs are also interested in hearing about the fallout from IR35, which is what has actually happened here. HMRC have done the questionnaire on you and deemed you inside IR35, i.e. "deemed employment", which means the employer must pay 13.5% employer NIC. They are not allowed to take that out of your pay at all, although many companies have got around this by just changing the salary to be 13% lower.

The backdated tax thing is usually a code adjustment that results in you paying back the underpayment in instalments. At some point an employer did that to me because they didn't process my previous employers P45 correctly. I did not end up with no salary...

@SamphiretheStickerist
I appreciate that most will pay on account after the initial self assessment, but by the sounds of it OP is newly into ‘self employment’ and wouldn’t have paid on account and therefore should be accounting for tax and NI from the payments- even more so for the additional payments on account which when she submits her 2nd tax return would then be the first chance for a refund.

If you were working as a real freelancer, then you should have been registered as self employed and completing tax returns every year.

It sounds like you never registered yourself as self employed? Why not?

But... there ate rules about this sort of thing now. You cant be called a self employed freelancer if you are essentially acting as an employee. True freelance work is fine but acting as an employee in every way other than the title isnt really allowed now.

When you started freelancing, you should have registered as self employed. If you're going to freelance with any other companies then get yourself registered as self employed.

This company you work for at the moment are using you as an employee but without all the protections an employee has and that isnt allowed. They are now having to sort it. Call citizens advice about them deducting all this stuff from your next pay.

@Sparklydiplodocus as previously mentioned as an employee you are entitled to the stat min of 28 days holiday (can include bank hold) and also they will need to deal with a pension- they should have been paying in a minimum of 3% with your contribution of 5%

It's likely that you have 'failed' one or more of the questions regarding being a freelancer, such as being allowed to pick your own hours, working base, having other clients, etc. and are working in a way that makes you an employee rather than self-employed.

Op, first...have you done a check of employment status? You can use a tool on government site.

When you got the job what was discussed? Do they have a HR & Finance department or is this a very small company.

Have you paid tax as a self employed person?

But you would have had to pay tax and NI from your wages anyway?

Freelancer rules have changes. If you solely work for one company for all your working hours you should be employed by the company.

I should be on their payroll as a freelancer

HMRC did not say that as it is a contradiction in terms. Freelancers are not on the payroll. What I suspect HMRC said is that you are an employee and should be on the payroll as an employee.

Last year, when you were being paid as a freelancer, you should have been putting away money to cover your self assessment tax and NI. This is your tax to pay, not your employers although they should have been incurring their employer NI and should have been paying you holiday pay. I am not sure why you would not be paying last years tax and NI directly yourself, but as I say it is yours to pay.

Regarding your next pay at the end of March, well sometimes it can be a long gap for a new starter, this seems a bit longer than most, but I wouldn’t say it is completely unacceptable

Did you pay tax and NI for the year of self-employed work you did? Did you submit a tax return?

This seems like a bit of a muddle! If you were truly working SE then you are liable for your own NI and tax for the previous tax year, and should have been putting money aside to pay for it.

This is linked to IR35. Basically it doesn't matter what you or the company say - if you are working as if you were an employee (for example, you only have 1 client and you aren't allowed to get someone else to do the work for you ie you can't subcontract) then in the eyes of HMRC you are an employee and need to be registered and taxed as such.

Call them and ask for further advice. You should be able to come to an agreement with them that your outstanding NI etc can be paid back in parts rather than all in one go.

If you've been freelancing for the past 12 months, why haven't you already registered with HMRC as a self-employed sole trader? Have you not been putting 25% aside for tax and NI?

If you can, ask to speak to their payroll person directly, ask them to explain it to you, including the relevant professional advice they have received.

@DartmoorChef

A freelancer isn't on a payroll. They submit an invoice and the company pay it. That's how's its worked at every company I know.

Well yes, but you can only be a freelancer if you also work for other organisations, set your own hours and fees etc.

Seems to me like the OP has only been working for this business, so really isn't freelance at all, and the employer is trying to avoid paying Employers' NI contributions, not having to add the OP the company pension scheme, and not offering statutory benefits such as holiday and sick pay and so on. HMRC have rightly picked up on that.

@Sparklydiplodocus Presumably they have been paying you regularly up to now? What have you done with the money they have paid you so far? Because you should have been setting aside some of it to pay your own tax and NI.

They also think I should be paying the historic tax and NI and are taking it all out of my wages in March! That’s not what the tax man said!

It sounds like what they're doing is retrospectively treating their actual payments to you as payments of salary from which the omitted to deduct tax. You should have been setting aside some of those payments to pay tax and NI as a self-employed person anyway, so them expecting you pay historical tax and NI won't actually make you significantly worse off. (Slightly worse off due to higher employee NI, I think.)

Having said that, when an employer fails to deduct PAYE, the employer is expected to pay to fix the problem by treating what they paid you as net salary and adding tax and NI on top, which means that they will end up paying a lot more for your labour than either of you agreed at the outset. They can get out of this by saying it was an error made in good faith to make the wrong deductions, but HMRC needs to accept that before the liability can be transferred to you.

www.gov.uk/hmrc-internal-manuals/paye-manual/paye90020#:~:text=If%20an%20employer%20fails%20to,HMRC%20makes%20a%20PAYE%20direction.

Yes, @RandomLondoner I would agree with that.

And that does seem to be what OP was told. Fixing the problem becomes the 'fine' the company pays for having got the IR35 status wrong in the first place.

I am confused. Have you not been setting aside money to pay your tax liability?

Or did you just intend not to pay any?

[quote RandomLondoner]They also think I should be paying the historic tax and NI and are taking it all out of my wages in March! That’s not what the tax man said!

It sounds like what they're doing is retrospectively treating their actual payments to you as payments of salary from which the omitted to deduct tax. You should have been setting aside some of those payments to pay tax and NI as a self-employed person anyway, so them expecting you pay historical tax and NI won't actually make you significantly worse off. (Slightly worse off due to higher employee NI, I think.)

Having said that, when an employer fails to deduct PAYE, the employer is expected to pay to fix the problem by treating what they paid you as net salary and adding tax and NI on top, which means that they will end up paying a lot more for your labour than either of you agreed at the outset. They can get out of this by saying it was an error made in good faith to make the wrong deductions, but HMRC needs to accept that before the liability can be transferred to you.

www.gov.uk/hmrc-internal-manuals/paye-manual/paye90020#:~:text=If%20an%20employer%20fails%20to,HMRC%20makes%20a%20PAYE%20direction.[/quote]
Yes this - they cannot just unilaterally deduct historic PAYE and NICs without your consent. That's why new contracts now have explicit provisions in them which say PAYE etc is the freelancer's responsibility and if HMRC come after the company, the freelancer will pay up to the company.

Ok here’s some more info for clarity.

I don’t earn much. I do have another job which is 10 hours a week. I do about 10 hours a week for this company we are talking about as well.

Originally they wanted me to tell them the days/ hours I’d worked at the end of each month and they’d pay me. After a few months I was like shouldnt I be declaring this to HMRC or whatever?! And they sent me the link to self- assessment. However, I’ve never freelanced before and am not set up as my own company, so I sought advice from HMRC and here we are.

I don’t intend to dodge tax or NI obviously and am more than happy to pay anything I owe. However, HMRC said that as this was the company’s fuck up and not mine that they’d have to pay any missed NI or tax from the last year, rather than me paying it.

My company are saying I’ve got to pay it.

I don’t even know whether to carry on working for them. I like the work but they’re a shambles and have mucked me about a lot. I get stressed trying to fit all their work in to the week and for what- this?

I only stay because I’d like to break into their field properly.