Registering as Self Employed with no tax liability

[apwood]

I left a job to care for my mother and she pays for my lost earnings. I still have another small part time PAYE job.

In total I earn nearly £1000 less than my tax code allowance (£10,280 total), so no tax is payable on my job or additional self-employed earnings. Half my earnings are from my mother, half from my job. I don't pay NI either.

Do I need to register as self-employed, given there is no liability to pay any income tax? What about National Insurance - I'd rather not pay if possible!?

If it's my choice, what are the pros and cons of registering? I guess it might create extra work completing a self assessment return.

For example, would I need to be registered if I leave my job to care full time, so I could claim carers allowance and declare my self-employed earnings?

[Lambs]

A,

I am not sure that I would consider the money given to you by your mother to be earnings that are taxable. From memory - and please note it is many years since I have dealt with such a case - HMRC accepts that such payments can be made out of one person's love and affection for a relative, and not be taxable income in the hands of the recipient.

Does this help?

Kind regards,

Lambs

[apwood]

Thanks. It is a regular monthly amount. How could I check?

If it is taxable, would I need to register even though no income tax is due?

[bd6759]

If it is taxable it would be employment income because you are not carrying on a trade.

If there is no liability there are no repercussions and nothing for you to declare.

Paying NI is something you should consider because of the benefits that depend on contributions. Your future pension, for example.

[apwood]

Thanks, sounds good. I guessed caring for my Mum would count as a service and therefore as a trade.

It does seem that gifts can be given and assuming they are from taxable income and are no more than £3000 per year there is no inheritance tax liability, This is is, however £4910 per year so there could be some liability if her estate is big enough, probably isn't though.

What I'm not clear about is in what circumstances help like this is considered a gift rather than payment because of the care being provided. My mum has dementia and limited mental capacity so I can't now ask her about what her intentions were. (She decided to do this back in September 2018).

[bd6759]

Don’t worry about IHT limits. Generally a gift isn’t immediately liable to IHT unless it exceeds the nil rate band. The gift limits have a specific purpose to prevent a person disposing of their assets before death to avoid IHT.

If a payment is given to you in exchange for a service it is not a gift, it is income. A waiter’s tip is a gift, but it is still employment income.

[robbob]

Thanks, sounds good. I guessed caring for my Mum would count as a service and therefore as a trade.

You don't have an automatic right to elect to treat yourself as self employed unfortunately, for any services like this you always end up in the grey are that could be targetted by hmrc. Generally if its employment type work and there are no other customers and no financial risk it kinda falls within the area where hmrc would want it to be employment earnings. Here is the official tool that hmrc recommend be run to see if employment is their "presumed" correct option


https://www.gov.uk/guidance/check-employment-status-for-tax


There is further advise here , note its almost certain if you have another job a paye scheme would need to be setup and the payments would need to be reported to hmrc on or before you are paid.There are exemptions form setting up paye scheme where all employeees are paid below the lower earnings limit - however this exemption does not apply where you have other employment. The default is to deducted basic rate tax and then you as the employee need to get your tax code split with hmrc.


https://www.gov.uk/au-pairs-employment-law

https://www.gov.uk/paye-for-employers


Are hmrc likley to be worried about the wrong status if there is no loss of tax - probably not but if the scheme should have been run the penalties for not running the scheme are pretty horrendous and best not messed with IMHO.

[Lambs]

I am not convinced that these payments are taxable. They are almost certainly not subject to NICs, if the parent and carer are living under the same roof. Depending on the payer's income sources, the amounts could well comprise "gifts out of income" and be wholly exempt from consideration for IHT purposes.

Does a contract of service actually exist in such a scenario?

See for example the Employment Status Manual at

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm4016

- and I strongly suspect that having a CoP order is not actually a pre-requisite, despite what HMRC appears to suggest.

With regards,

Lambs

[apwood]

I'm inclined to assume this is a voluntary payment / gift rather than employment (or self-employment) for the following reasons:

I have cared for my Mum for many years. Recently the need for care has increased. So I left my morning job and started doing more for her and visiting more often and spending more time with her. This has gradually increased since then so it's been over 35 hours a week probably for at least the last 6 months. I do now occasionally do gardening that I didn't do before (instead of other family members) although we sometimes pay a gardener to help, and I do more cleaning than I did before; I do a lot more food preparation, washing, personal hygiene and sorting out her medical needs.

I have power of attorney (financial and health) as do others in the family. One of the other attorneys talked to Mum about this before the gifts started and says he always understood they were gifts. She didn't want to pay for a stranger to help and preferred me to continue to be her helper. He wrote a note at the time when he talked to my Mum and has kept a copy (along with the signed standing order from Mum) that said: "Muriel does not want xxx to be disadvantaged by giving up his morning job ... and has agreed to gift xxx £410 per month.

Is it advisable to contact HMRC for advice? I'm worried they will simply take the easy road (for them) of getting me to declare this as employment or self-employment when it isn't.