self-employed or Limited company?

Re: self-employed or Limited company?

Sarah Keir — Thu, 20 Oct 2011 12:31:14 GMT

I'm not an account/lawyer and neither do I work for HMRC, but my husband works in a non-veterinary field doing the equivelant of 'locuming' so here is what he did.

He would only get short term contracts if he set up a Limited Company - dead easy, a little money to companies house and a business bank account through HSBC (free if less than ceratin amount of money and don't need extras). He is the only company director and there are no employees. In the IT world, short term contracts are the equivalent of locuming, range from a week or 2 up to six months. So I don't see how this time limit of working at a particular place can be true. He does his accounts and tax returns hinself - again, easy, do it online, buy some guides on how to effeciently fill in (cheaper than paying an accountant). Can't remember what happens about NI - but I'm not sure if that is just another online form.

Any help? Seems easy to me.

Re: self-employed or Limited company?

Neil Wheadon — Wed, 19 Oct 2011 20:37:31 GMT

I've been told, and this is unconfirmed that if a locum is a limited company, then the Inland Revenue won't tolorate you working somewhere for more than 13 weeks and questions will be asked why the person isn't PAYE or self employed. With an increase in maternity leave work this will increasingly come into play if correct. I'd be grateful if an informed opinion can either confirm this or tell me it's not the case

Neil

Re: self-employed or Limited company?

Robin Grimmer — Wed, 19 Oct 2011 19:43:32 GMT

back to my OP - I have bitten the bullet and set up a Ltd company. Good luck to any locum who is self-employed, but I think you will find increasingly that more and more practices will not accept a locum on that basis.

Re: self-employed or Limited company?

Luciano Nebiante PGCertSAS — Tue, 11 Oct 2011 17:29:14 GMT

[quote user="plantagenet"]

the hot water they would be in is far hotter than that which you would be!

[/quote]

I don't think I'd like to swim in that hot water either as employed or employer.

Anyway I made clear the situation, speaking with the accountant of the practice, who knows her stuff.

And seemed to be a misunderstanding between the agency and the practice itself.

That's why I started to be concerned and asked here.

Anyway, all is sorted, and they are happy to pay me either through an umbrella company or on PAYE basis.

And doing some maths, the umbrella option seems better for me. But we'll see!

Thanks for your help. Much appreciated.

Luciano

Re: self-employed or Limited company?

plantagenet — Tue, 11 Oct 2011 08:04:41 GMT

[quote user="Luciano Nebiante"]I'm not on that route, don't worry! [/quote]

Sorry, didn't mean to imply you were - just anxious that your employer seems to be treating you as if you might be - bit of a risk since the hot water they would be in is far hotter than that which you would be!

Re: self-employed or Limited company?

Luciano Nebiante PGCertSAS — Mon, 10 Oct 2011 23:30:50 GMT

Thanks plantagenet. Better I call HMRC and ask them, they can have some advise.

Anyway I'm not employed.

[quote user="plantagenet"]

The middle road of 'cash in hand' is definitely not allowed.

[/quote]

I'm not on that route, don't worry!

Re: self-employed or Limited company?

plantagenet — Mon, 10 Oct 2011 22:55:15 GMT

[quote user="Luciano Nebiante"]Now what I have heard, is that I can pay taxes and NI through HMRC website without registering as self-employed if it's a temporary job.[/quote]

I don't think that can be right - if you are self employed you have to pay one rate of NI, so you would have to register. If you are employed, you have to pay NI but your employer has to pay their employer contribution NI in addition so you would have to be an employee.

If its a temporary job (or a 2nd job) you can be employed on a BR tax code for PAYE, but your employer still needs your NI number and to do it officially.

The middle road of 'cash in hand' is definitely not allowed.

Re: self-employed or Limited company?

Luciano Nebiante PGCertSAS — Mon, 10 Oct 2011 21:25:53 GMT

Thanks for your answers.

It's also a new situation to me, and to my agency. And apparently this is the only practice doing this.

Now what I have heard, is that I can pay taxes and NI through HMRC website without registering as self-employed if it's a temporary job.

And I was wondering if any of you is aware of this.

I don't really want to register as self-employed and I do prefer to work thorugh the umbrella company, because I'm not planning to work as locum in a long term basis.

Obviously if I'll be a locum for long time, certainly the best thing to do is being self-employed, as it's the best tax position.

Cheers,

Luciano

Re: self-employed or Limited company?

Tim Mainland — Mon, 10 Oct 2011 12:37:48 GMT

The Locums on the list have missed the point here. It is not about whether or not YOU have had any issues with your status. It is about potential future practice liability. If a practice employs a locum via PAYE then all tax and NI - both employer and Employee- is paid. End of. Any taxman will be happy and no potential for future tax issues. As a self employed locum, payed gross, the practice is still liable if a. The locum doesn't pay HMRC or b. A taxman disputes the self employed status. I say a taxman because they tend to interpret rules personally. Just because a taxman tells a locum that his self employed status is ok it does not mean that another taxman won't take the opposite view with the practce and later demand employers NIC. Limited company status seems to help, but the great accountant guru John Sower is not really happy unless his practices employ Locums on PAYE.

Re: self-employed or Limited company?

Clive Ansell — Mon, 10 Oct 2011 10:20:40 GMT

[quote user="Luciano Nebiante"]

I have been working for a practice which will pay me gross, and then I have to pay my own taxes and NI.

Is there a way to do that without registering as a self-employed?

Thanks in advance.

Luciano

[/quote]

I think the others have already answered this, but you must register with HMRC for self assessment status as soon as possible. You also need to register for and pay class 2 NI which is about £10/month.

HMRC

I am amazed that a practice has paid you gross without verifying your self employment or Ltd co status, HMRC may approach them for the unpaid tax and NI.

I used an accountant in my first year of self employment, and they gave good advise about claiming expenses, what can and cannot be claimed etc. Keep receipts.

Re: self-employed or Limited company?

Robin Grimmer — Sun, 09 Oct 2011 15:02:48 GMT

You must register as self-employed. I am surprised that a practice would agree to use your services without proof of self-employment or Ltd company status. It doesn't actually cost anything to register as self-employed with HMRC, but when you do you will need to set up a standing order to pay your Class II (?) NI contributions which you pay or a regular basis and are quite low.

You will need to keep track of all your business-related expenses. You will need to submit a tax return after the tax year has finished. You can either do this yourself or use an accountant which will typically cost around £500. I would strongly recommend using an accountant especially if you are new to locum work as they will know what you can claim to offset against your tax and also deal with HMRC if you get any problems or queries.

Re: self-employed or Limited company?

plantagenet — Sun, 09 Oct 2011 14:26:51 GMT

[quote user="Luciano Nebiante"]I have been working for a practice which will pay me gross, and then I have to pay my own taxes and NI.[/quote]

Sorry, but you really need to do your homework about employment or you are going to get you/your employer into hot water.

You are either an employee - of a practice or your own locum limited company, or you are self employed, properly registered and submitting accounts. If in doubt, ask an accountant.

The practice that has paid you needs to know immediately that you are not registered self employed.

Re: self-employed or Limited company?

Luciano Nebiante PGCertSAS — Sun, 09 Oct 2011 13:43:10 GMT

[quote user="Clive Ansell"]

I have been self employed for 10 years - registered with and accepted by HMRC as such - as a locum with no problems whatsoever. I have not come across a practice yet that will not accept my self employment status. My invoices show my self assessment number, my VAT registration number and a sentence stating that I am self employed and accept full responsibility for any taxes which may become due.

Being PAYE as a locum makes no sense at all. One would would have to pay a higher rate of NIC (12% cf 9%), plus the employer would have to pay an additional 13.8% in employers' NIC. ludicrous.

[/quote]

Hi Clive, you seem quite well informed about employment status and HMRC.

So you may have the answer to my question.

I have been working for a practice which will pay me gross, and then I have to pay my own taxes and NI.

Is there a way to do that without registering as a self-employed?

Thanks in advance.

Luciano

Re: self-employed or Limited company?

Robin Grimmer — Fri, 07 Oct 2011 21:09:04 GMT

That's interesting. I know some of the corporates eg Vets Now won't accept self-employed status. I can understand why some practices won't pay you gross. HMRC could chase them for tax or NI if they don't consider you to be self-employed.

I guess it helps to have several different practices. Over the last year I have been doing a lot more work for one practice - albeit irregular hours; sometimes weeks at a time and other times odd days. This practice has now being advised by their accountant that for their protection I should either be an employee or Ltd company. I don't want to be either. Ltd company only makes sense if you are earning >40k. Then the amount you save in NI is greater than the fees involved in setting up and running a Ltd company.

Re: self-employed or Limited company?

Clive Ansell — Fri, 07 Oct 2011 20:22:46 GMT

Being PAYE as a locum makes no sense at all. One would would have to pay a higher rate of NIC (12% cf 9%), plus the employer would have to pay an additional 13.8% in employers' NIC. ludicrous.

Re: self-employed or Limited company?

Alan Tevendale — Fri, 07 Oct 2011 19:39:41 GMT

I'd far prefer to employ a locum not going through an umbrella company. Whether they are a limited company or self employed makes little difference to me.

Re: self-employed or Limited company?

Claire Edgington — Fri, 07 Oct 2011 19:31:30 GMT

When I was locuming, I went with an umbrella company. It was easy from the point of view of not having to chase payments and getting your tax worked out for you but I was disappointed with my take home pay. Possibly it was the fee that the particular company I went with charged but also I had to pay the employers NI as well as employees NI.

Re: self-employed or Limited company?

plantagenet — Fri, 07 Oct 2011 16:10:50 GMT

I never had any problem as self employed, so long as you fulfil the criteria, but that is a few years ago. The locums I employ now are half one and half the other. Tax man seems ok with it