Is he employed or self employed????

[smudgedlipstick]

Hi all, have clearly namechanged...

Please help my clarify if my partner is employed or self employed.. or a subcontractor!

He has worked for the same company for years as self employed, he gets paid through a contract service company that the company he works for use to pay wages. He receives payslips/pay statements through the post every month showing how much he has been paid and how much tax he has paid. He gets paid weekly but just receives a text telling him how much as his hours change every week. This is all from the service contract company. He pays tax weekly out is his wages but he also completes a tax return every year. He doesn't get any holiday pay or sick pay.

Is he employed or self employed??

smudged don't panic - if you have problems with someone who doesn't understand this market, worst case you have to pay a bit more and go to a specialist broker for contractor mortgages.

It'll be alright, don't panic. If you've got the work history you will be ok.

Dupainduvin is it likely that we would be able to borrow the same amount just pay slightly more a month, or not be able to borrow the same amount?

the only difference would be that you'd have to pay a fee to the mortgage broker that specialises in contractor mortgages.

I used a company called CMME and found them really good, they charged us £950 or something like that (contractor mortgages made easy, which sounded like a scam but they're not).

If you get the greenlight from your current bank/etc, then all well and good, but IF you get turned down related to DH's employment status, you should call them (or another company arranging contractor mortgages).

You really need to get him some IR35 advice too because as well as the mortgage company issue he could also have a HMRC issue and a bill!

well, umbrella companies are supposed to know what they're doing wrt to taxes, so in fact Op, if you are worried about tax then in the first instance, DH should contact his umbrella company and ask them for tax input as they are supposed to get that bit right. That's why you use umbrella companies.

Sorry I meant we have had a mortgage offer in principle but I think he has been put down as employed not self employed - if they changed it to self employed, would the monthly's payments go up, or would be not able to borrow us much on the mortgage. Have no qualms that he has tax payment issues, all of that is up to date and correct, they pay his tax for him.

Hopefully the OPs DH is just on CIS and isn't using an umbrella company. In the construction industry, no-one uses them out of choice, they use them because at one time it was pretty much the only way to get work and get paid. They were just subsidiaries of the agencies and they took a chunk of the workers wages and gave them fake pay slips, forcing them into tax avoidance, if they didn't want to lose half their wages.

CIS seems more common now - DP won't use umbrella companies, he'll only work with agencies who will use CIS.

What is an umbrella company? He is cis and gets paid through a contract company

They'll have to look at the application again and may or may not accept it. Depends how much you both earn, what the income multiple is and how long he's worked in this way.

If they won't accept the application, a broker might be the way to go - if you google CIS mortgages, there's loads of choice, but it will take some sifting through to find one that's not a cowboy - perhaps see if one of the big nationals can help you - John Charcol or London and Country.

The mortgages they offer you can be a bit crap and they have a tendency to push what they want to sell you (I found a much better deal myself and it was the BoE base rate tracker I wanted that has saved us thousands over the years, and not the discount from SVR that I would never accept as it relies on a bank playing fair and we all know that never happens) but at least they'll be able to find you somehting somewhere.

If he's subject to tax deductions under the CIS scheme then it follows that he's been accepted as self-employed by HMRC.

An umbrella company is one who says they employ you but in reality they just process the wages for a fee.

www.ucatt.org.uk/umbrella-company-con-trick

They say they save you tax but in reality they turn a £15 an hour wage into NMW plus a myriad of confusing expenses, bonuses etc and send you payslips that no-one understands. DP did it for a bit and to be honest, I just crossed my fingers when I did his tax return because I knew it was a work of fiction and HMRC are cracking down on this sort of stuff and people are getting tax bills from years ago. I'm just glad he didn't do it this way for long and if they catch up with him, the tax bill won't be much.

if the contract company you mention is in effect an employment agency, it sounds like the tax side of things will be OK.

I don't think he is under an umbrella company he works for. This is all too confusing. I will look at some of the contracted mortgage companies out there, I think he is classed as a subcontractor then?

He's only a subcontractor if he's submitting invoices to the company. If he's receiving payslips, based on timesheets he's submitting, and his tax is PAYE, then he's an employee.

Doesn't sound as though he should be an employee though, sounds as though he should be a subcontractor submitting invoices. Just because he's registered for CIS doesn't mean that deductions are being made and he's being treated correctly unfortunately.

He doesn't submit invoices, he gives his manager his hours a week that's it

If you’re working every week for the same company with no choice in hours and no right to substitute someone else for you, you would be employed not a subcontractor. The company he is being paid via would be liable for the relevant tax and insurance, not him. This is what IR35 legislation was invented for.

ask advice from inland revenue they do have information line & you don't have to give name (ring them! it takes time)

If he is CIS then he is self-employed from a mortgage side (he can argue with his bosses if he should be classed as an employee rather than self-employed for holiday pay etc but that doesn't seem to be an issue for the moment).

He would be classed for the mortgage as self-employed and they would base his ability to borrow on his last, usually three years, tax returns. They will show what he has earned (they would include his CIS payments and any private work if he does that).

I can't answer for whether it will affect your mortgage in principle. As long as he has enough accounts (they would have gone off his tax returns rather than wage slips) then he would have passed the affordability test whether they ticked the self-employed or employed box.

If in doubt query it with the mortgage adviser and they can check for you as it may be that is how they list CIS on their applications.

Hi everyone,

OP has asked for this thread to be moved to Employment Issues, so we'll be moving it there shortly.

What really matters here is how he is taxed, i.e. does he get a payslip with a tax code and having tax/NIC deducted (employed) or does he get some document with just 20% CIS tax deducted (self employed).

HMRC employment status checker is a red herring and doesn't matter for this purpose. For a mortgage, all that matters is whether he's taxed as employed or self employed. The mortgage company may want to see his tax return details, so what he says on his mortgage applications needs to match his tax return.

From what the OP has said, I suspect the CIS 20% tax is deducted which means he's self employed for tax, and therefore self employed for mortgage applications. Simples.

Whether he is genuinely self employed or should be employed is a legal issue for courts to decide, and far, far, beyond the mortgage question. (Though if he is CIS 20% tax deductions, then regardless of the HMRC employment status checker, he'll almost certainly be accepted by HMRC as self employed as that's the way the industry operates!).