slim_mcslim Posted September 15, 2006 Share Posted September 15, 2006 Definition of self employed is somthing that is confusing me, it has been said on this forum that inorder to be a bone-fide self employed contractor you must submit quotes to clients, and work for more than 3 or 4 companies, and it has also been said that this is the guidelines coming from the HMRC. If this is the case how does it work for people like driving instructors ? They are self employed, but contracted to a driving school, in one case I have come across for at least 3 years, yet they are still classified as self employed, but can only work for one company, so where does it come from that freelancers must work for more than 1 ? Paul.... Link to comment Share on other sites More sharing options...
Brian Posted September 15, 2006 Share Posted September 15, 2006 The tests that HMRC apply are on their website here. Link to comment Share on other sites More sharing options...
indigogecko Posted September 15, 2006 Author Share Posted September 15, 2006 Went to my bank today and they've got me an apointment to set up a business account for new sole traders, which includes a local business accountant on standby and the first 45 mins with them for free, so killing multiple birds with one empty wallet as it were. The amount I'm getting paid for my first job is enough for a starting deposit as well. Thank you all for the advice, I'm feeling a lot more confident about my first steps now! Link to comment Share on other sites More sharing options...
Simon Lewis Posted September 15, 2006 Share Posted September 15, 2006 The tests that HMRC apply are on their website here. It's a pity that they seem to have stopped using "is there a 'Master / Slave' relationship" as a criteria. It always gave me some amusing mental images ;-) Link to comment Share on other sites More sharing options...
joliver1502 Posted September 18, 2006 Share Posted September 18, 2006 Yeah I'm really confused with the whole tax/self employment thing as well. I've signed myself up as self-employed and so far the Inland Rev have only been asking me to pay National Insurance Contributions every month or so which I do. Am I doing the right thing so far? Will they send me a letter saying I have to pay my taxes at the end of the year? Do self-employed people get a tax number as such becuase I don't know if I have one or not? I just know my NI number which they have. My minds boggled now! As a self employed professional - hopefully I can shed some light on the subject! Self Employment, can be a bit of a minefield - and if you get if wrong - you can end up in prison - but thats really in extreme cases. With this in mind, it is oftern worth contacting an Accountant or Tax Manager for advice - be aware though that many are not familiar with the entertainment industry however, and so you may not get the best advice. On that note I can recomend someone, should anyone require it. In simple terms, if you take on a job and get TAX (Not National Insurance - which is different - and will go into later) deducted from your pay when you receive it - this is called PAYE (pay as you earn) and is not classed as self employment. If you do not get tax deducted at source - then this is self employment. If you are taking on work as Self Employed - you must notify the inland revenue - and you will be issued with a Unique Tax Reference (formerly known as Schedule D). Self employment usually applies to Freelancers who take on work with many companies for short periods of time - I.e one gig or whatever, and therefore not placed on a company's payroll. However you can be, as I am, employed on a No1 tour under a 12month contract - but still be classed as self employed for tax purposes. The benefit of self employment over PAYE is, is that the amount of tax you pay is calculated, with the amount of personal expense required to do job taking into consideration. I.e in laymans terms you only get taxed on the profit you made from all those self employed jobs in the finanical year. Whereas PAYE you simply pay tax based purely on the amount of money you received at that one time - once you have begun earning over the threshold. Of course you have to be able to prove your expenses against your income - therfore you must keep every single receipt that is work related. I.e tools, workwear, petrol to get to and from work, accomodation if away from home, food if away from home, telephone bills highlighting business calls etc etc. As well as keeping copies of invoices, payslips - I.e if it work related keep it!! At the end of the finanical year (Apr - Apr) you must submit your tax return to the Inland Rev. Who will then send you a bill stating how much tax you have to pay and buy when. Doing your tax return can be quite daunting, and that is where the Accountant comes in handy!! In terms of National Insurance Contributions (NICS) there are a few types. The most common are: Class 1 - is where NIC's are deducted from your pay at source - just like PAYE. Class 2 is when you pay an amount monthly. You should only ever be paying one type of NICS at any one time. And this is where the confusion surronding the Entertainment Industry is most oftern prolific, as people may frit to and from each type. Generally speaking as a 'freelancer', you would pay Class 2 NIC's, much for same reason, in that you are not on a company's payroll. due to length of contract. If like me you are on a long term contract e.g 12 months, You will prob pay Class 1 NICs. It is possible and common (Particulary in no1 touring theatre for Stage Managers) to be on Class 1 NIC's and Self Employed for tax purposes. Am kinda tired now, and losing my train of thought, so going to stop there. Hope this has help a bit - please feel free to ask questions!! Link to comment Share on other sites More sharing options...
Guest lightnix Posted September 19, 2006 Share Posted September 19, 2006 Check out this old thread on Freelancing for further info. See also here and here. Hope that helps :) FWIW: according to my accountant, the only thing you really, absolutely need to be able to demonstrate, to prove self-employment to the taxman, is the right of substitution, i.e. being able to send somebody else along to carry out the work on your behalf. This, above all, demonstrates to the Inland Revenue that you are on a contract for services, rather than a contract of service. Just bear in mind that any additional costs incurred in making the substitution will be yours to bear and in order to avoid being hit for PAYE yourself, for the substitute, you will need to grant them the right of substitution too, etc., etc., ad nauseum And as Jivemaster once pointed out: if you book Norman Cook, you don't expect Tony Blackburn to show up ;) Link to comment Share on other sites More sharing options...
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