Really need some advice! Employment status.

[ImALittlePea]

Sorry if this is a bit garbled and complicated but I'm a bit panicky.

Brief background - lost my job (made redundant last year due to covid), had baby at around the same time. I worked in a restaurant last summer and in my DH's business (limited company) since last autumn. Both paid me via bank transfer but neither have produced payslips for me.

I only earn £100/week through the business (and earned less at the restaurant), so I'm comfortable that I'm under tax threshold etc. But I've just had a mortgage appointment (as ours is coming up for renewal) and was told that I haven't been registered as an official employee (otherwise would receive payslips) or as a Director on CH, so my income is inadmissible re mortgage lenders. And even though it's only a tiny bit of income, it could still tip the balance one way or another when it comes to our next move.

So one issue is - what's the most effective way to be set up, as an employee or a Director? Are there any particular benefits of one set up over the other when it comes to tax, general financial health, looking forward to the future etc?

The other issue is, I'm pretty certain that I should be due a tax rebate from HMRC for tax paid during my previous employment (as overall my income for the year is below the taxable threshold, but tax was paid as normal at the beginning of the 2021/22 financial year). I've tried to use their website to start this process, but as I don't know what my employment status is in terms of the income earned since I was made redundant I'm struggling to proceed with it. I want to fully declare everything, obviously, but I don't want to inadvertently 'red flag' myself with HMRC by selecting the wrong option. I have worked, but never given a contract with either the restaurant or DH business.

Just feels like a mess and I'm not sure how to start resolving it.

Sorry if any errors, it's muddled etc. As I said, I'm panicking about it all. Please can someone help?

Bumping in the hope someone will see this

Surely your dh will know whether you were set up as an employee or not? It is his business after all?

It’s a legal requirement to be provided with pay slips and a written contract of employment. I suggest contacting the employers for the documents.

Both your employers are acting illegally.

@Babyroobs he hasn't set me up properly. To start with I invoiced for hours worked, but now it's a standard weekly payment. This is the issue - we need to sort it but not sure whether being an employee or registered as a director is better.

I doubt the restaurant will be able to provide me with any paperwork for my 3 months there last summer @Parker231 and DH (current employer)/I didn't realise the legal requirements for me to work for him, as neither of us have been in this position before (the business isn't his main job, it's a side interest). We want to resolve it but I'm not sure the best way to do this.

@Paq hence wanting to sort it now. The restaurant are no longer my employer. I do feel naive for not knowing what needed to be done, but equally I've never been in this position before so why would I. Hence asking for (what I was hoping would be practical) advice.

Does your DH have an accountant? Speak to them & they'll be able to advise on the best way to set you up within the company.

He does, although I'm sure he said he needed to find a new one as she was becoming less responsive. But I'll get him to call her tomorrow. Thank you @JenniferWooley

You can't just decide whether to be an employee, IR35 rules will deem that you are.

You need to both sit down with a nice accountant and get the business basics right.

@Paq it has been suggested that I can be registered as a director of the company, rather than an employee. But yes, you're right, we do need to get to grips with the basics of it - again, hence asking the question!

I worry about your Husbands Business to be honest. It sounds quite badly run, at least from the point of view of employment
Invoicing your husband’s company might be seen as dodgy - do you have a registered company set up to pay tax or at least do an annual return? If you have no other clients and can’t send a substitute you may be subject to IR35 so your husbands company could be prosecuted and fined. If you are an employee you need wage slips amongst other things
The whole thing is a mess and you need an Accountant to sort it out.

You can become a Director (suggest you take 50% of shares) if ltd co. Then you can take a small wage to ensure your NI is covered and then you take the rest in dividends, which may be more tax efficient but you MUST actually work there.

@Hoppinggreen the business is just me and him. He had always submitted tax returns via an accountant, but she isn't responding to queries at the moment so we're in the process of trying to find another one now.

Personally no I don't have a registered company set up, but aware I need to do a personal tax return. I do actually work for/in the business.

Agree, it feels like a mess. I'm quite upset and stressed by it, I asked him many times to sort it out when I started to work for him and he hasn't. And now I'm worried that I/we could be in trouble.

Yes but what about YOUR business? If you invoiced his business you must have one of some type

Have you paid tax on any of this money?

@Hoppinggreen no I don't have a business. I honestly wasn't aware that was needed - what I sent DH was basically a time sheet for hours worked that week, I just called an "invoice".

I've just spoken to a local accountant who we are meeting with next week and has assured me that we can sort it all out from top to bottom. Won't stop me from feeling sick until then, though.

I am aware it's a horrible mess. I'm really stressed about it now, and feel SO naïve. But as I think I've already said, I've been 'properly' employed for over 20 years so have never had to deal with this stuff before.

I am not an accountant but have /am variously PAYE/Self Employed/Director, with VAT in the mix as well.
Unless we are talking massive sums over a long period of time its only a small pickle.
Presume you've got your P45 from your job via redundancy (and it wasn't an illegal redundancy given you were pregnant/on maternity leave)?
So your pickle is only for what 12-18 months?. Something an accountant can sort out easily. You will need to set up an HMRC 'Portal' account thing and do a tax return. You (and accountant) will have to way up whether Director or Self employed is the way to go (I very much doubt that PAYE will be the solution - far too much hassle if there is only the two of you and no expansion in number of employees likely!).
You need to take a look at HMRC and .gov.uk business section and that will give you some pointers.
The restaurant should have given you salary slips - did they say they were paying your tax/nic? It is them that will be in trouble not you - esp if you are below the tax threshold for 2021/2022.
Are any means tested benefits involved and if so have you/do you declare what you are being 'paid'?
You can be a director, self employed and on PAYE all at the same time.

As previous posters have said you need to actually be doing something for the business (although you can just be a director) and your DH not giving you £100/week for doing nothing (but you do mention time sheets).
Relax really. Do a bit of research, get an accountant and if needs be take your mortgage reapplication to a specialist broker.

It IS a pickle but its not a disaster and its perfectly sortable with the help of an Accountant. Worst case scenario you might get a small fine or have to pay tax you didnt expect but it will be ok.
Once its sorted please check the other aspects of your H's business as well in case its run as slapdash as this bit.
Thats not a criticism, I see it all the time but you do need certain processes in place to be legally compliant and keep HMRC onside
As I said, no need to panic, it will be Ok once its sorted.

Don't worry you are doing the right thing getting it sorted out and seeing a professional.
You do not need to feel sick about it!

Honestly OP don't stress about this - it is fixable.

I've seen some absolute disasters in my time working in the payroll, pensions & benefits side of accountancy practice!

I'm pretty sure you need to register as a sole trader if you earn more than £1k from self-employed work. As PPs say, it's not the biggest pickle so don't panic, but it is a legal requirement so good that you're getting it sorted.

I've been a sole trader and had a ltd company - the latter tends to cost a bit more for getting accounts done (although your DH is paying for that anyway), but can work out better in terms of tax/dividends. That said, if you're working for other companies (as with the cafe), then being director of that co wouldn't cover that. So have a good read of the relevant sections on gov.uk and see which suits you, then any half-decent accountant should be able to get you set up. Whether it will be in time for your mortgage needs is a different matter. Sounds like you'll struggle to get payslips for the cafe so can't count it as legit income anyway.

When you do have the proper paperwork, it can be useful to get recommendations for mortgage brokers and lenders who are particularly good with self-employed people as the PAYE generalists can be less than helpful.

@Forestdweller11 thank you for your measured reply. I've been working in the business for 8 months, and earning way below the tax threshold, although potentially above the NI threshold.
Yes I have p45 from previous employer, and yes the redundancy was above board.
The restaurant did not give payslips etc, no, so I'm not sure if they went properly through payroll. I imagine not.
I'm not on any benefits.
I do work for the business, 100%.
I've tried looking on the websites but at the moment it's not making much sense. Possibly because I've got myself in a panic so I'll look again at the weekend.
The accountant I spoke to today was confident everything would be fixable without much trouble. She suggested PAYE (although she offers it as a service so I will also find out more about being self-employed) plus becoming a director/shareholder.

@Hoppinggreen thank you. Yes I think the accountant is of the same mindset that the whole business needs a set-up health check, as I said DH has used an accountant for tax
returns but as you suggest I would feel better knowing everything is as it should be.

@whereamu thank you. I promise I'm not actually a total idiot in general, but have massively dropped a ball here and the thought it could land us in trouble with HMRC is very unpleasant. I do feel better having spoken to an accountant and getting a meeting in place.

@JenniferWooley thank you. Thankfully the timeframe and money involved isn't huge, but it still feels like a horrid mess. But as you say, it's a fixable one, so I'm focusing on that now.