Q: I’m a production editor looking to set up on my own, taking with me two clients. One of the clients said that he might have to treat me as PAYE. Is this right?
Aug 17 2005
Answered by: Jackie Jarvis Ask a question
Well he might be. The Inland Revenue have been really tightening up on who counts as self-employed over the last few years and there have been test cases with actors and freelance cameramen among others. Directors and consultants have also been targeted by tax inspectors.
It’s now a key part of planning your switch from employee to self-employed to ensure that you will be treated for tax purposes as you want. If you start off paying tax and National Insurance as a self-employed person, but later either your tax office or the Contributions Agency decide that you are an employee you will have to pay back taxes. So sort it out first.
You are in danger of being treated as an employee because you are starting your business just working for two clients. Your tax office may decide that these are two part-time jobs.
To satisfy the agencies that you are in business on your own, you should be able to answer ‘yes’ to the following questions:
• do you control how your business is run, eg do you decide where and when you do the work?
• have you invested your own money in the business, eg have you bought major items of equipment?
• do you have to meet any losses?
• can you use other people to fulfil your contracts?
• if you make a mistake, do you have to pay for it?
If you are in any doubt, ask the Contributions Agency to confirm what status the Agency thinks you have.
Comments