My nephew, aged 23, has been having a hard time trying to get himself a steady job and instead has been doing 3 small jobs (cleaning, part time waiter) which equalled to not much more than 2 days work a week.

Back in April he got a knock on the door from a family acquaintance who runs a small landscaping business who offered my nephew work for 5 days a week, until minimally end of August at a rate of pay of £60.00 per day. This family acquaintance advised my nephew that he would need to register as self employed and invoice him each month and he would pay him by cheque. All has gone well, paid promptly etc. in the meantime our acquaintance advised that as his workload was increasing he would almost certainly keep my nephew on until the end of year and probably beyond. My nephew quit his other small jobs and registered as self employed.

All going well until last week the inland revenue contacted my nephew and asked for further details regarding his employment status. They advised that he was essentially an employee rather than self employed (as he has no other sources of income) and that his employer was simply trying to avoid paying my nephews tax/NI etc. they also went on to advise that as an employee he would have basic employment rights etc and should pursue this. In the mean time our mutual acquaintance has been cutting my nephews days and now stating that he probably won’t have any work left for him come August.

It all sounds very messy to me and I’m not sure what to advise? Anyone have any ideas what the bloody hell is/should be going on?

He’s caught up in IR35

http://www.contractorcalculator.co.uk/IR35.aspx

Im not clued up enough to offer any help Im afraid.

I have been there, and it gets messy.Need paper work otherwise its a verbal contract gone sour ,back to original contract to end august. 3 months work on a self employed status offers no rights -find a new job learn and put it down to experience. The Gardener did not want the hassle of staff and rights and paperwork(and why would he)so he went for self employed ? any work is surley good work .Think of the new skills the nephew learnt and go from there ?

How long has your nephew been employed by said aquaintance?

Has he kept any books relating to his self employed status ,paid NI or tax on his earnings
did he inform HMRC within 3 months of becoming self employed

sounds like they are trying the ir35 route though it depends if he is inside or outside ir35 one way he pays,
the other your aquaintance will carry the can for the tax and NI

Simple, your nephew is a self employed landscape / gardner / labourer, so he does what any other self employed person does when his main customer (the acquaintance) reduces their demand – he goes and finds additional work from other customers.

My nephew has kept copies of all his invoices and has so far earned approx £6000 since 6th April. He informed HMRC immediately of his self employment status. He has paid no tax/NI yet although has set-up a direct debit to pay his NI (not much more than £12 per month). He isn’t going to earn beyond the threshold for income tax I wouldn’t have thought.

At the minute he’s more worried that he’s going to lose a load of money he has earned rather than the verbal contract going sour.

He has invoices informed them etc what do they want him to do get a paper round on saturdays just to prove he can earn an extra income…as poly says he’s self employed

That’s exactly what I initially said to him to put his mind at rest but then I looked into a little further and discovered information about proving that you have multiple sources of income and all this stuff about him technically being an employee rather than self employed.

It all seems a bit OTT.

At the minute he’s more worried that he’s going to lose a load of money he has earned rather than the verbal contract going sour.

OK – so to be slightly more helpful. HMRC are trying to stop people exploiting the system by declaring as self employed when really they are employees. This will be explained in the IR35 link above. The ‘loophole’ benefits both ’employer’ and ’employee’ but as the employee loses some rights of actually being an employee he is disadvantaged too – this is what HMRC have explained to your nephew – although with zero hours contracts and 2 yrs before any redundancy etc applies its unlikely to be a major advantage.

If your nephew wants to remain self employed (which might suddenly mean his boss/customer is more interested in finding him work!) then you can probably help! Do you or anyone you know need work doing? If he cuts some grass / hedges etc, issues invoices for it then suddenly he is not just employed by one place and IR35 does not apply. Even better if he need to supply the tools (lawnmower, PPE etc) and gets some form of insurance (all of which are legitimate costs so tax deductable); likewise if he had a bunch of business cards run off promoting his service; then his phone etc could also be legit expenses. If it was my Nephew that is what I would be doing to help him establish himself both to avoid the HMRC issue and so he wasn’t reliant on one guy for work. Has he got a plan when the bad weather arrived over winter and landscaping type work reduces?

Thanks poly, useful info. In all honesty I think all he ever wanted was to put a few grand in his bank account to pay to do some training courses and get himself a car.

He had no long term plan to stay self employed or run his own business. The opportunity came up to earn some half decent money over the summer with the proviso that he register as self employed and invoice accordingly. He’s done all that and he feels like its starting to backfire on him. I think ultimately once the work available dried up he simply planned to advise HMRC that he was no longer self employed. Sadly he didn’t stop and ask anyone for advice before he acted.

To complicate matters, ‘self-employment’ rules for tax have changed in the last few years to make it more complicated to take on casual staff legally.
I’m a S/E sparky, who works for a plumber on occasion. I used to just give him an invoice for my work. Now, to do it legally, I should be registered with the IR/HMRC as a sub contractor, he then pays me, but deducts around 25% tax, which he is supposed to pay to HMRC, along with the paperwork.
Of course, in the real world it doesnt happen, I just put ‘goods supplied’ on the invoice, rather than ‘Labour charge’, so he doesnt do any more paperwork, I dont get deductions.

Sounds like your friend has not been doing this correctly, so both could be liable to fines if HMRC take an interest.