Self employed employing self employed

[MochaShots]

If anyone could quickly help me with a few business related things I'd be grateful.

If a self employed tradesman takes on another self employed tradesman on a very regular basis. Do they need to employ them? If not, and they pay them a weekly wage, is this legal and is the wage classed as an expense?

This is not for me by the way, I'm clueless.

Many thanks

ACAS have a helpline and give employment advice google the number.

You can use this HMRC tool to help decide the correct status:

www.gov.uk/guidance/check-employment-status-for-tax

basically it depends on various factors.

But there are a huge amount of people out there who should be employed that are self employed. As long as they do a tax return then they shouldn't have a problem, but if HMRC did investigate the "employer" they could hit them for any tax/NIC that they think is due.

So yes, the self employed "employer" declares it as a cost for labour and the self employed "employee" declares it as income.

You ask if they need to employ them and then ask “if not” and they pay them a weekly wage. Well if they are paying them a weekly wage that would suggest they are being employed. As it is a contradiction in terms to say they are not employing them but are paying them a wage..

As as to whether it should be classified as employment, well that depends, there are tests /questionnaires that can be taken to help determine employment status.

Whatever payments are being made from one party to the other would certainly be a business expense. Whether it is being done legally or not would depend upon the findings of the employment status tests.

I think it makes quite a difference if the person you are paying does work for other people/companies, if so, they can invoice you for their time, which you claim as a business expense. If they work only for you, there are different rules involved.

Employee or subcontractor?

Does the person set their own rate? Do they have other customers? Do they invoice? Can they decline work? Set terms? Etc.

Thanks for your advice. So the person in question believes if this guy registers as self employed, he can uses him all the time and just pay him a wage. I said this would mean he was an employee as he wont be working for anyone else, but he said it would be more like a subcontractor.

You need to be much more clued up on the differences between employment and self employment, IR35, rights and responsibilities as an employer, etc otherwise you run the risk of creating serious problems for yourself.

It is not as simple as that. It certainly is not as simple as somebody registering as self employed. That doesn’t mean they are.

OP, my understanding of your last post is that that situation would cause problems in both directions. Your subbie needs to be seen to be taking work regularly from a number of contractors on a market basis, or HMRC are going to interpret the majority of his work coming from one source as employment.

I do this regularly (employ other freelancers to do work I can't do) and the link above is a great tool. I check every time and also check regularly for any longer term arrangements to make sure nothing has changed.

But to be honest, there's also quite a good way of working it out. Ask yourself "is this person basically an employee but they're trying to get out of the hassle of employing them".

If the answer is Yes then it's not allowed. IR35 has really closed a lot of loopholes that used to exist.

If you're asking on behalf of the person who has received this 'Job Proposal' then the answer is NO - particularly if the person receiving this 'offer' isn't currently self-employed with an existing customer base. Just say IR35 Rules.

If you're asking for the prospective Employer - then also NO - you can't be both self-employed, meaning responsible for your own 'holiday' and sickness breaks, pension, etc and be at the beck and call of someone else. You can be so on a Temporary, Short Term Contractual Basis.

The days of piss-taking, zero-hours Contracts started to go out of favour with Brexit (once the cheap labour tap got turned off).

You've said tradesman, I'm assuming construction/ building work here. It gets messy with construction and there are potentially bigger issues than HMRC for the contractor, the 'sub-contractor' and or the end client, depending on what work is undertaken by the 'sub-contracting' person.

(There is a specific category and scheme for actual sub-contraction CIS but they need to be registered under it.)

The words "it would be more like a subcontractor" are a huge alarm bell.

Otherwise, a genuinely self employed builder (A) with their own customer base can go and do work for another genuinely self employed builder, (B) but they wouldn't be getting a wage from B, they (A) would invoice B for the work/services/equipment supplied. (and it would be very unlikely to be weekly) They would be very foolish not to have a contract clearly stating what they were contracted to do.

In order to remain considered self employed, amongst other things A would need a number of other customers. If they aren't already self employed, just walk away now.

From the POV of the person B is constructing for, any mistakes/ issues with A or their work will generally be down to (and possibly disputed by) B's insurance unless there is a contract between B and their client, saying otherwise. B then pursues A through the courts for recompense.

A real subcontractor has a contract with the contractor for the services they provide.
An employee of the contractor cannot also be a subcontractor.

If the 'subcontractor' is later found by HMRC to be an employee, and there are later issues with the work or time frame, the contractor is going to be well up the Swanee.

If they do it anyway, A would be well advised to have their own injury insurance.
B sounds at best clueless, and at worst dangerous for A, and possibly B's clients.