Self Employed & Income Tax

[Bigfoot111]

I "retired" back in April. My former employers have just come back to me and asked me to do some consultancy work for them which will last 3-4 months. I have decided to do it on a self employed basis rather than setting up a limited company. My question is that when I submit invoices to them, which I will be doing on a monthly basis, do HMRC determine my income tax liability based on my invoice date or the date I actually get paid.

TIA

[PinkDalek]

I "retired" back in April. My former employers have just come back to me and asked me to do some consultancy work for them which will last 3-4 months. I have decided to do it on a self employed basis rather than setting up a limited company. My question is that when I submit invoices to them, which I will be doing on a monthly basis, do HMRC determine my income tax liability based on my invoice date or the date I actually get paid.

TIA

You may be eligible for the Cash Basis.

See also Working for yourself which leads to Register if you're self-employed or a sole trader.

[Bigfoot111]

That's perfect.

Thanks very much.

[Slarti]

Sorry to rain on the parade but................ Back in 2000 the government passed legislation to tax people who did what you are doing much more heavily than had traditionally been the case. The legislation is commonly known as IR35 and is aimed primarily at former employees who return to a previous employer off pay roll. You may of course, choose to ignore what I have told you. I am after all, only the messenger. But I believe you really, seriously, need to speak with your former employer's HR dept about compliance with this legislation. HTH.

I agree that Bigfoot111 needs to do some research on IR35, but I did think that it only applied to people working through intermediaries, not the self employed working directly for a company.

Also, employer's HR may well not understand IR35 as it does not directly affect them.

Slarti

[melonfool]

Sorry to rain on the parade but................ Back in 2000 the government passed legislation to tax people who did what you are doing much more heavily than had traditionally been the case. The legislation is commonly known as IR35 and is aimed primarily at former employees who return to a previous employer off pay roll. You may of course, choose to ignore what I have told you. I am after all, only the messenger. But I believe you really, seriously, need to speak with your former employer's HR dept about compliance with this legislation. HTH.

I agree that Bigfoot111 needs to do some research on IR35, but I did think that it only applied to people working through intermediaries, not the self employed working directly for a company.

Also, employer's HR may well not understand IR35 as it does not directly affect them.

Slarti

IME, having worked in several HR departments, they won't have a clue what you're talking about (I would). You'd need to get them to speak to the company tax advisers.

But I agree, I don't think this is for sole traders, I think it's an issue for Ltd companies.

Some info here (none is clear cut and HMRC decide in the end): http://www.contractoruk.com/ir35/can_i_ ... rader.html

If it's only 3-4 months I don't think it's an issue really.

Mel

[RedT]

It's not just for ltd companies, in the recent budget it's been highlighted that they will now look at the self employed as well.

Whilst IR35 is a possible concern as it's been 6 months of so since you worked for your previous employer, you will most likely be ok, the main concern is how your client treats you, is this a business to business relationship with you providing services to the client that they don't have in-house (various expertise etc) or will you be directly supervised, directed and controlled? Will you just be another member of the staff team.

If you are the later, IR35 will apply and you will taxed heavily and only allowed 5% of your income to be marked as expenses (until April where it looks like that 5% is going to go).

[Bigfoot111]

Hi All,

Notifications of updates stopped coming through so I've only just noticed the activity since my last post.

I took advice from an accountant prior to deciding whether to set up a Limited Company or go down the self-employed route. This included discussing IR35 implications and a review of the contract I would be signing with my former employer. That, along with the duration and nature of the work, lead to him suggesting to me that there were no material advantages of going down the Ltd Co. route and also that IR35 should not be a problem.

Also my former employer has done similar deals like this before for much longer periods than this one will be and for full time contracts (mine is only part time and I have flexibility over days I work) and they have not been caught out before vis a vis IR35, although I do not know if they have had to argue their position with HMRC yet.

I have looked into the insurance side of it and am comfortable with my position wrt the nature of the work being done.

Thanks