Self Employed? help?!

[joebloggs]

I am a UK resident and have just started working in the UK for a German employer. I have to invoice the company every month for my work and have been told to arrange my own tax and NI contributions- therefore am I self-employed?!?
Should I register with the Inland Revenue for self assesment? Also I am a full time student, does this affect the amount of tax I will pay?

[mike.hayes@firstcapi]

dear Joe,

The best starting point is the Inland Revenue booklet IR56, this is available on their website:-

http://www.inlandrevenue.gov.uk/pdfs/ir56.pdf

In general 'employers' check these things fairly carefully, as they don't want to fall foul of the Inland Revenue.

You need to register with the Inland Revenue for NI contributions within 2 months of starting self-employment, it may be as well to register for self-assessment at the same time.

I am afraid that full-time students have no special tax breaks and pay tax at the same rates as everyone else.

What you need to consider is the legal questions relating to self-employment e.g. no sick pay, no holiday pay, do you need insurance both for you and whoever you undertake work for, will you get regular income etc.

If you are happy with these things then fine, being self-employed has some real advantages. If you were just looking for a holiday job, make sure the financial reward outweighs the disadvantages.

At the end of the day cooking burgers in MacDonalds may be a better bet!

Mike

[expattax]

Hi Joe,

Not always that straightforward. The Inland Revenue are likely to consider you an employee of the German company and thus the onus might be on you to operate PAYE on yourself.

If you are self employed you may have to register for VAT etc.

It depends what type of work you are doing in the UK for them. You could be creating a branch of the German company in the UK for UK Coproration Tax purposes.

If you want assistance please let me know and I'll give you a quote.

Regards

Mark J Hooper
US Enrolled Agent
mark@expattax.org.uk

[mike.hayes@firstcapi]

'The Inland Revenue are likely to consider you an employee' - You can't know this without knowing what the terms and conditions are. The worst that could happen is that he is treated as an employee, and either he or his 'employer' has to deduct PAYE. If he has to, then i'm sure this forum can help him to do this, either way he won't be out of pocket.

If you read Joe's e-mail you will see he is a full-time student, so if he can earn above £58,000 whilst doing this, then i'd be amazed. So i don't think VAT is likely to be a problem.

Mike

[Ian McTernan CTA]

Agree with Mark on this on- the Revenue will seek to make you an employee unless you can show the 'badges of trade' that mark you out as self employed. 'Terms and conditions' generally appear in employment contracts....

I also agree with Mark on the branch and the German company would do well to get some proper advice to avoid problems later on, such as facing fines and penalties for not registering for UK corporation tax on the profits generated in the UK, etc., etc.

VAT may be a problem for the German company and it may have to register here, dependent on what it is doing here.

Ian McTernan CTA
McTernan Associates Ltd
Chartered Tax Advisers
ian@imcternan.com