AIBU to be concerned about how my husband has arranged our son's employment?

[SpottyGreengiraffe]

My husband runs a small roofing business. Our son, aged 17 has helped him out with jobs over the past year.

As far as I understand, my son is an employee paid through PAYE. He receives wages and payslips, and has ever mentioned being self-employed.

Recently, while helping him sort out some paperwork, I discovered that my son has been registered as self-employed through CIS and has a UTR number.
My son doesn't seem to understand what being self-employed means, and neither remembers agreeing to take responsibility for their own tax returns.

My husband's brother and his wife help with the business accounts and payroll, so I'm not entirely sure who actually arranged the registrations.
I'm worried that they could end up with Self Assessment obligations, penalties or tax liabilities they know nothing about etc.

My husband tends to become defensive when I question business matters, so I'm trying to understand the situation independently before raising it again.
AIBU to think this needs investigating?
Has anyone experienced something similar? Can someone be registered as self-employed without properly understanding or authorising it? And can HMRC check whether CIS payments have been reported in their names?

Thanks in advance.

Check his contract and payslips. It will say if the company os deducting tax at source or not.

It is definitely possible and fine to employ someone as self-employed without doing more than saying “we’ll pay you £x per hour, you are responsible for your own tax”in their contract - it is not the responsibility of the employer to confirm that their freelance employees understand their own finances correctly.

However, this is a young lad in a family business so you’d hope for a higher duty of care towards him - maybe the uncle/aunt assumed your husband would go over it all with him but your husband didn’t realise it wasn’t PAYE as he didn’t ask/your son didn’t know any better?

Also, more importantly, does this mean he isn’t eligible for sick leave and isn’t paying pension contributions (at 17 part-time he might not yet want to get involved in pension but the other rights are important).

Roughly how much has he earned ? The first £12k of income is tax free anyway. If he's just doing odd days here or there, he's not going to qualify for sick pay or any other employment rights anyway.

Cis is a standard mechanism in the building industry. However I agree your son needs to understand if if he's registered for it.

Working under CIS means that the company keeps back a % to give directly to HMRC towards his tax bill. If he’s registered as a subcontractor this amount is usually 20%. If he isn’t registered it’s usually 30%. Our family business subcontracts some people under the scheme and if they’ve not registered with HMRC our payroll software flags up the higher rate.

Technically he shouldn’t be landed with a huge tax bill because the company should be paying it on his behalf at a flat rate but he will need to do a tax return to work out his final figure next April. Our subcontractors invoice us after each job so they’re aware of how much tax has been paid on their behalf.

Sorry, just to add, while some subcontractors like using the scheme as they are truly self employed and have the flexibility to work on their own projects but also pick up work elsewhere, plus can purchase tax deductible equipment, there are downsides. If you’re not charging a decent day rate that would allow you to put aside a buffer for holidays/sick/pension, or actually operating in a self-employed capacity it’s not as beneficial. I think some companies try to get employees to go down this route because it benefits the company to the detriment of the worker.

Yeah it needs investigating but prepare yourself for the fallout. You can context citizens advice for free.

Totally standard for construction subcontractors.

That’s doesn’t mean you can just not declare it to HMRC

If he is CIS he will be having 20% deducted at source. He needs to register and complete a self assessment and he is likely to be able to claim some tax back. Most tradesmen I know are CIS workers.

Some mortgage lenders treat them as employed, others as self employed so it actually gives him flexibility if he eventually wants to buy a house.

He will have to sort out his tax, I assume register as self employed, do a self assessment tax return, it's quite a lot of work and possibly he should have done a return for last year if he was working before April. He could potentially also be charging the business expenses. It doesn't sound like a good position to put a young man in if he doesn't understand the implications. You can look it all up on line to make sure you understand the exact position with national insurance, tax, etc.

Very standard in the construction industry to be CIS and will work best for him on net pay too. Looks like they are doing the right thing by him to me.