Freelance Question

[stew]

Hey guys,

I have a quick question to ask, pretty sure this is the best spot for it so here goes.

I'm working at a local college filling in for a graphic designer who is off ill, so far I've done 5 days and will do another 5 next week, with a possibility of it being work up until Christmas.

They have asked me to invoice them for the work rather than put me through the PAYE scheme as an employee, and I'm being paid directly.

I had a letter through from the tax man just a few weeks ago asking about my circumstance (I had been a student for a few years and I assume they were wondering why I'd dropped out of the system after having done some part time work) and stupid me posted it off just after I started working temporarily with the college so it's got me down as unemployed rather than employed...

However where I am stuck is with what the do about the situation, I'm earning £6 an hour (pennies I know but I need the money with the run upto christmas so I'll take it) and will be far below the tax threshold, however I would rather not be stung with tax penalties or anything like that. So is it worth notifying the HMRC of my change of circumstances? And the problem is what do I notify them to be? I'm not an employee really, or at least I'm not being paid that way, would I need to register as self-employed and deal with all the hassle of tax returns etc for what will be a whopping £450?

I did some work with the college earlier in the year which was paid in the same way, which amounted to much the same amount of money but I was told by the college not to worry about declaring it, however now I'm starting to think I should've done since I am now picking up this bit of work as well...

Could do with some advice and suggestions,

Thanks,

Stew

[Impressive Creations]

When you work freelance you will need 2 reference numbers from the IR so that the employers will know how much tax to deduct, if you come under the threshold the tax will be returned to you. I am sure that there are accountants on here that will give you the facts in detail.

[stew]

When you work freelance you will need 2 reference numbers from the IR so that the employers will know how much tax to deduct, if you come under the threshold the tax will be returned to you. I am sure that there are accountants on here that will give you the facts in detail.

Hmmmmm, never got asked for anything like that, was told to sort out an invoice and hand it in.

I'll need to have a word with them on Monday morning find out what's going on, as reading the HMRC website my circumstances really put me as an employee of the college rather than a freelancer...

Why is this all so complicated?! ARGH!

[Calibre Designs]

If they are your only customer/likely to be your only customer (that you will actually invoice) then I doubt that you will pass IR35 and therefore cannot pass the self employed status.

They want you to invoice them due to less admin on their part. As a freelancer, should this be the route, you should be charging much more than that just to cover the inconvenience for dealing with the tax man.

Another case of exploitation! Really makes my blood boil.

[stew]

If they are your only customer/likely to be your only customer (that you will actually invoice) then I doubt that you will pass IR35 and therefore cannot pass the self employed status.

They want you to invoice them due to less admin on their part. As a freelancer, should this be the route, you should be charging much more than that just to cover the inconvenience for dealing with the tax man.

Another case of exploitation! Really makes my blood boil.

So do you think the tax man will see me as an employee then rather than self-employed?

I'll definitely need to speak with the college on Monday and ask where I stand, if not I'll need to phone the tax office and see what they say... fun times ahead! lol

Thanks for your help

[Calibre Designs]

HMRC states :

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Read more here : http://www.hmrc.gov.uk/employment-status/index.htm

[Indizine]

The college are on dodgy ground as much as you are if you dont get it sorted.

Paying you £6 an hour gross, is equal to well be below the National Minimum Wage and is an insult to you. You should be charging way more and they are taking advantage of you. You may be earning under the tax threshold but that is none of their business.

From what you describe, though there are other points to consider which you will read in the link Kay provided, it sounds like you are indeed employed.

Technically speaking from HMRC point of view, you are running a business when you raise your first invoice to your second customer.

You should always declare all types of income on your tax form, and the work you did before should have been decalred as earned income on your tax return for that year. It is your responsibility to declare it regardless of you being under the tax threashold.

It surprises me they told you not to declare it but then someone who offers to pay you £6 an hour on a freelance basis is either ignorant of employment laws (surprised their HR dept hasnt being involved??) or is pulling a fast one on you to save on costs. You or they still have to pay NI even if you dont pay any tax as a result.

[accountantpete]

Strictly speaking Stew, you should regarded as employed by the College and paid through their PAYE system.

Unofficially you can register as self-employed with your local tax office but then you would have to fill in a small earnings exemption certificate to avoid paying the stamp and file annual accounts together with a tax return.

I think the former route is preferable in your case.

[stew]

It surprises me they told you not to declare it but then someone who offers to pay you £6 an hour on a freelance basis is either ignorant of employment laws (surprised their HR dept hasnt being involved??) or is pulling a fast one on you to save on costs. You or they still have to pay NI even if you dont pay any tax as a result.

I know the hourly rate is far below what it should be, I recently graduated college so the experience is just as important to me as the actual pay - although I would like to be earning more and will demand more depending on what is said on Monday.

Strictly speaking Stew, you should regarded as employed by the College and paid through their PAYE system.

Unofficially you can register as self-employed with your local tax office but then you would have to fill in a small earnings exemption certificate to avoid paying the stamp and file annual accounts together with a tax return.

I think the former route is preferable in your case.

The former route certainly is preferable.

However, if it does come down to having to register as self-employed, how difficult are all the forms and filing annual accounts? Is it something I could do without hiring an accountant?

This is looking at only being a week or two of work I'm trying to work out whether to get put onto the college's PAYE system or register self-employed for what will work out as less than £400 of income and then seeing £300 walk out the door for an accountant to file accounts for me...

Thanks for help guys, I'll speak to the college first thing Monday morning about it and see what they say and then go from there, I've got an accountant in the family friends so I will speak to him ASAP about where I stand for definite.

[Indizine]

Another after thought - you can also declare 'other earned income' - it used to be on the previous form so I presume it will still be on the new one.

You dont need to become 'self employed' just to declare some one-off type earned income. As it is you are not running a business so you dont need to declare yourself as self employed in this instance. It will be a one-off period for one company oin this tax year, so far as you know.

A family member of mine used to declare a few hundred pounds for occasional trianing seminars she did for me in her spare (evening) time. She worked for no one else as she had a f/t job already. She just declared as 'other earned income' and in her case, paid a bit extra tax on the £600 or so that she earned. She was not running a business and thus was not self employed either.