Self-employed workers urged to understand risks around rights and unpaid tax
MHA MacIntyre Hudson director Nigel Morris discusses the recent issues around self-employed persons recently having been left owing large sums of tax after finding that the accounting company they used disappeared with the money.
With instances on the increase, Unite have launched legal action against two agencies, which the union claims are using “sham and bogus” self-employment practices. There is growing concern amongst a number of workers about how at risk they are regarding HMRC fines or the refusal of workers’ rights.
HMRC inquiries are also underway into the situation, that’s allegedly left workers with unpaid tax bills and HMRC are urging people to be clear what they are signing up to!
Arrangements with agencies often include the use of limited companies whose affairs are administered by someone else on the worker’s behalf and where the worker is given a small weekly wage plus expenses and dividends.
Whilst self-employment and zero hours contracts can be a good way of providing and engaging services, offering flexibility for both employer and employee, they are not suitable for everyone.
For instance, self-employed workers and directors often have many more responsibilities than employees as well as potentially more uncertainty and less rights. On the other hand, permanent employees may have less flexibility, be under more obligations and also be at risk of sanctions if they choose not to undertake the duties required. But, they do benefit from certainty that the responsibility to withhold and pay over tax and NIC is that of their employer and they often have stronger employment rights and benefits i.e. paid absence, sickness etc.
So, what can people do?
It is important to remember that it is the worker’s responsibility to ensure that they are paying the correct amount of tax and, where they are the director of a limited company, that they are ultimately responsible for ensuring that it is properly run, not the person administering it for them.
It is possible to manage the risk of inappropriate actions, such as those stated above by carrying out a few simple safeguards, as follows:
Obtain copies of all appropriate documentation, including:
- Companies House incorporation documentation
- Annual company returns
- Annual company accounts
Ensure that you receive regular reports of activity, including:
- Monthly RTi PAYE submission documents and receipt notifications (at least as a screen print)
- Monthly RTi payment submission documents
- Access to the HMRC online account showing submissions, payments and liabilities for PAYE, CT and VAT
- Business bank statements
Engage an independent accountant to undertake any self-assessment responsibilities you have, as they will also be able to consider if the arrangements and documentation from any administrator stacks up.
However, workers should also consider if in fact the arrangements that they are engaged under are right for them and that they are happy with the structure and their status in the first place.
HMRC are keen to ensure that wherever possible workers are engaged as employees and that PAYE is correctly operated and that full employment rights provided to the workers. Where the arrangement takes any other form, it is likely that HMRC will want to review the position and ensure that they are appropriate and fully compliant – with HMRC taking appropriate action where they are not.