Self Employed Sub Contractor

[HongKongphooey]

My partner has an electrical business and has recently got a self employed electrician who is working for him. We pay him and take off 20% tax which we then pay to the Tax office for him. We did have guys on the books but it was very expensive with all the NI and tax we had to pay. So when they left for another job, he said he would only have a self employed guy. My question is how long can we continuously employ him. Someone said the Tax office have a limit for continuous employment of subbies of 3/4 months? They said you can't have them working for you indefinately without a break. Yet a friend of ours who's got a company putting up 'garden rooms' (posh sheds) employs sub-contractors continuously. Does anyone know the rules. Tried looking on Tax website but can't find the answer. Any help most appreciated.

[BRIGHT SPARK]

You could employ him through an agency...you pay the agency..then they pay him.It costs more but it may be better than losing your subbie ...and keeping within the law.

[chrissa1]

If he is self employed, doesn't he pay his own tax?

[chrissa1]

Through, Self Assessment.

[pixie373]

Yes. He pays his own tax if self-employed. We've had the same clients for years on end, as self-employed.

[BRIGHT SPARK]

The construction industry operates the CIS scheme and if the turnover/profits of the subbie is below the set level or they owe tax the employer has to deduct 20% tax on all labour.

[pixie373]

How would they know though? He could be working for any number of people?

[HongKongphooey]

Thanks guys, but it doesn't answer my question. How long are we allowed to employ him on a self employed basis?

[pixie373]

Hongkongphooey, if you're employing him and paying his taxes, he isn't self-employed for you.
from HMRC government website
//Top

If you are self-employed

You are responsible for your own tax and National Insurance contributions. This means telling HM Revenue & Customs (HMRC) about your income by filling in a Self Assessment tax return.
You should register for tax and National Insurance with HMRC as soon as you start working for yourself. If you delay registering you may have to pay penalties.//

so you should have standard employer responsibility and can employ him as long as you like.

[Sycamore3House]

I was under the impression that if you are self employed you have to do different jobs. So if your bloke is say working on a production line day in day out that would be classed as the same job. Where if he is assigned to different sites etc that means he is within the rules for self employment. Does he submit invoices to you for different jobs?

[boxtops]

He's either self-employed or he's not. If he's on your payroll and you are deducting tax and NI, then he's not self-employed. If he were self-employed, he would be invoicing you for the work he's doing for you, and being responsible for his own tax and NI. I'm can't tell from your OP which is actually happening.

[BRIGHT SPARK]

Under the construction industry scheme the tax man decides whether or not you are on gross payment or 20% deduction.The employer is responsible for enquiring via the tax office as to which applies,and you will be issued with a unique tax reference.The subbies invoices are then paid gross or net.If you get it wrong you will both get a fine!!.THIS SYSTEM ONLY APPLIES TO THE CONSTRUCTION INDUSTRY.
I would say your limit is about right..however it could be longer if the subbie invoiced you for some materials occasionally ..provided quotes for work or worked elsewhere now and then.

[boxtops]

Thank you, bright spark - I didn't know that. Hopefully that clears up the OP's query.

[1eyedjack]

So many myths to bust. So little time.
Whether the relationship is one of employment or self employment is a highly complex issue based on a large number of factors considered in the round. Length of service is not a significant factor, at least not in isolation, and where it is a factor of any relevance at all, there is no set time. There was an occasion when "red" Dawn Primorolo (back when Labour were in power) opined that 3 months was relevant, but that has never been upheld in courts or tribunals, nor does it appear in any statute.
Nor is whether the "employee" is otherwise registered as self employed in other work a deciding factor although it can be influential.
Nor is it simply a matter of choice. A popular myth is that the parties simply have to agree between them that it be treated as self employment and job done. Not so.
And the very LAST place that I would go for independent advice is guidance published by HMRC, who have a vested interest in having arrangements classified as employment.
That said, HMRC do provide a very useful "employment status indicator tool" on their website. Go to their home page and put that in their internal search engine.
Even then, HMRC state that they will not be bound by the outcome, although provided that you do it properly you are somewhat protected from penalties and back duty assessments if the result gets overturned.
To be frank, you may be best advised to go to a professional and pay for an opinion.