I am considered by my only employer as self employed. The reality is that I do not meet the Inland Revenue's tests for self employment [1, 2]. My employer is well aware of this.
My employer wants all full time couriers to sign a PAYE contract. I am being offered £2 per week above my current wage, but I'll be hit with a 23% NI and tax whammy.
I am currently able to offset my bike related expenses against tax. This new contract takes little account of the tax offset and still expects me to provide my equipment at my own expense. I am being offered a daily maintenance allowance of £1.75. I am also being offered 20 days paid holiday per year.
Since I do not meet the self employment criteria, I was under the impression that my employer should have been paying my NI and tax. The new contract stipulates that by signing it, I am agreeing that I was previously self employed. This I am unwilling to do.
One solution to this which is beneficial to my employer and me is remaining self employed by forming either a partnership or limited company. My employer will pay no tax and I will continue to pay National Insurance contributions and offset my work expenses against tax.
1 - www.hmrc.gov.uk/employment-status/index.htm
2 - www.hmrc.gov.uk/calcs/esi.htm
Any advice?
Employers don't pay a workers tax and National Insurance contributions under PAYE. As a self-employed worker, soletrader, in your case, you have to pay Class 2 contributions, from the date you started as self-employed. I also think you have to notify the Inland Revenue within 3 months of becoming self-employed [ie register as Self-Employed]. If you don't meet their criteria you may well face finacial penalties. On the Income Tax side of things; it is not quite enough to state that you can offset your bike against tax: As I understand it, you get an allowance for work related expenditure, but then you are taxed on your "profits" - which would be your wages after "expenses". You also have to submit Tax returns.
Furthermore, a worker is solely responsible for sorting out their correct tax code as well as the Class of NI contributions. (I got stung around £3,000 in taxes I owed the Inland Revenue - I made a genuine oversight regarding tax codes on two separate incomes - not only did I have to pay it back; I had to negotiate repayment terms [based on my income] and if it wasnt repaid on the specified dates and within a specified period of time I faced a penalty clause. The bastards had me hook, line and sinker.
Your employer obviously classes you as self employed as they abdicate all responsibility for you as a worker. They can also change the structure of the terms of employment - if you choose not to sign up for PAYE they can say bye bye and probably get away with it. Cos I reckon it would not be technically classed as unfair dismissal
I reckon the Tax man has probably been breathing down their necks and they are trying to clean up their own books. For your own part, you need to make sure your "books" are up to date.
I personally think you would be better off PAYE, making sure you also have terms of employment and a contract.[You also get paid holidays and statuatory sick pay] In your present situation I suspect you have none of this, which leaves you as a very vulnerable worker.
The courier business is notoriously bad for workers - p/t, casual, dubious self-employed status etc. - and by my understanding poorly organised. I wonder if other Libcommers work as couriers?
Have you read "Couriers are Revolting- the dispatch industry workers union 1989-1992" - you may find this useful.
I hope my ramblings are slightly useful and hopefully stimulate others to contribute to this thread.