To D or not to D

A great ice breaker at parties. "My wife works as an escort". :-)

Who or what is "her firm"? Who pays her? If she *works for* the firm, this would suggest she is an employee.

Tell us a little more about how the setup works.

Who bills the parents, and for what? Is it the taxi firm, who is offering escorted trips as an additional service? Is it an independent "school run" firm who hires the taxis in? Who runs this firm? If not she, it doesn't look like she's really self-employed, particularly if she's not the only escort working for the firm.

As an aside, looking at taxi drivers, some are clearly employees, others are self-employed, having a stake in their own vehicles. Those of the latter kind may nevertheless be associated with a firm, but without working *for* it. Instead they use (and pay) this firm to provide a dispatch service, running the customer interface, as it were. Customers call the service to book a taxi, the service then calls the best-placed driver.

It's conceivable that your wife's "firm" is designed to operate on similar agency lines. They act as agents for several self employed escorts, to obtain and manage customers for them, and deduct a fee for their services from the money they then pass on to the escorts.

It looks pretty borderline, but if this is the case, she could well be seen as self-employed.

Being employed also gives her various employment rights and puts certain responsibilities on the employer. Being self employed is a distinct advantage for the "employer", which is why they are not allowed to make that choice arbitrarily.

The company should have a written rationale for her status.

"David Woolley" wrote

That'll be the *contract* ! ...

Is it a "contract of service" (employment), or a "contract for services" (self-employment)?

If she's working without a written contract, what will she do if something goes wrong? (eg the "firm" neglects to pay her...)

If they have any sense, the contract will be phrased in such a way that they are providing services to her, not the other way round.

The rationale is a statement of why the contract is a valid contract for a service. E.g. they could use HMRC's decision tool, provided they answered the questions honestly. A contract that claims that it is for a service may not actually be one.

One caution is that it seems that the borderline between employment and self employment varies between different parts of government, and even between tax and NI, within HMRC.

But, if the service is finding work, they had better be very sure that she is legally self employed, even if they are not the employer, as it would be illegal for them to demand consideration if they are finding her employment.

The council have appointed one taxi company to do a particular group of regular runs. She has to be licenced by the Council - they issue an Enhanced CRB Cert for her - and if the council are late paying the taxi firm, the taxi firm is late paying her.

She doesn't issue invoices or get payslips but signs a book every week to say the taxi firm have paid her, going in every Thursday to collect her money.

The council pay the taxi company's bills and this is a free service to the parents.

"David Woolley" wrote

Do you think that anyone should accept a simple statement?!

Surely it's better to ask HMRC for their opinion, and then have a letter from HMRC accepting that it's self-employment?

"David Woolley" wrote

But even then, that's only a "tool" and could later be shown to be wrong, when the situation is tested properly.

"David Woolley" wrote

Of course - all facts need to be considered.

"David Woolley" wrote

Yep, as in "not self-employment for tax" and "not employment for holidays etc"!!

"David Woolley" wrote

Really? HMRC itself says that a particular single contract is *both* a "contract of service" *and* a "contract for services", at the same time? I've not heard of that one...

If she is self employed, she pays Class 2 NIC of £2.40 per week if she earns above the threshold of £5,075 per year?

But that threshold presumably is Net Profit rather than Gross Reciepts?

She can offset Telephone, Travel, Use of Home, Stationery (pity she doesn't have a car) against that?

She only works for one employer - does she cease trading at the end of every term? Presumably not.

HMRC are well know for will erring on the side of employment even in cases where self employment is clear cut. Getting such opinion is likely to be worthless.

tim

"tim...." wrote

All the better when their opinion *is* self employment, then!!

"tim...." wrote

I beg to differ - when they say it's self-employment, and that's actually documented in a letter from them, then how can they wriggle out of it later?

The HMRC position is that they will stand by the tool if it is used honestly and recorded properly at the time.

They say that office cleaners may be employed for NI, but not for tax, in some circumstances. This might be a question of whether the agency or the user pays.

Yes, and she pays Class 4 NIC at 8% on the excess over £5715. But not paying Class 2 is not automatic, she would have to apply for "exception". It may be to her advantage not to do so, since it is the payment of Class

Correct.

Yes, but it doesn't sound, from your description, as though she has a lot of office expenses if all the admin is done by the taxi company. And travel to work is not allowable.

If she "works for an employer" as you put it, then she can't be self employed!

Not directly related to this case, but:

If a sole trader creates a product (either one or many) which is sold to a single customer, would he then be classed as being 'employed'?

If that still counts as being self-employed, what if the product became less tangible, such as software, or a licence, or any sort of service which was not charged at an hourly rate?

Finally, suppose a sole trader didn't have *any* customers or clients (eg. the expected single customer cancels an order); could they still be self-employed so that they can still claim expenses (assuming they've had some taxable income during the year)?

If they created the product and then tried to sell it, with a significant chance of failing to do so and losing the money they put into it, they probably wouldn't be employed.

The hourly rate may be the key here. Although I've never done contract programming, I believe HMRC use the IR35 procedures, so even if they try to insulate themselves with a limited company, they still get taxed on an employee (rather than dividend) type basis.

If they went in on a fixed price basis, against a defined specification, things might be different.

The likelihood of that happening, is one of the things that would indicate self employment. You may find that they can claim the loss even if they didn't have taxable income, that year - not sure about that. If the loss is allowable, it would probably have to be offset against later years.

But it won't be

I agree. But evidence suggests that you will never get such a letter

tim

"David Woolley" wrote

Do you really think so? Not all people remunerated on an hourly rate basis are "employed", some can still be "self-employed" ...

For instance, call up a plumber who charges an hourly rate - are you his "employer", and need to operate PAYE? No!

Eg2 get some lawyers or an accountant to do some work for you, charged at an hourly rate - are you their "employer", and need to operate PAYE? No!

"David Woolley" wrote

If the Ltd Co was merely a "front" to what would otherwise be a simple "contract of service", then yes. But if, in the absence of the Ltd Co, they would be classed as "self-employed" then IR35 wouldn't apply, would it?

"David Woolley" wrote

I wonder, can you be classed as "employed" (not s/e) on a "fixed price basis"? If you have a fixed salary, but no fixed hours (you stay until the work is completed), and need to perform to a deadline, then that sounds like "fixed price" for the work to me!!

You don't know until you try...

"tim...." wrote

Well, the evidence of my own eyes having seen such letters, and having seen a tax inspector then later accept one of those letters, would not only "suggest" but strongly indicate that you *can* get such a letter!

It's a while since I looked at this but IR35 status was often dependent on where you worked. If you worked on-site you would normally be classified as an employee otherwise you could be classified as self employed.