Are people working for you and submitting invoices (rather than being paid under PAYE)?
Getting people to invoice you, or giving them contracts that say they are self employed, does not mean they are.
HMRC and employment tribunals look at how the relationship is set up and managed – not just at the label you put on it.
Get the label wrong and you can be in for a nasty surprise.
- HMRC can come to you and ask for the PAYE you should have been deducting (with penalties too).
- Employment tribunals can decide you unfairly dismissed someone you didn’t even know you were employing!
Some of the freelancers you pay will genuinely be categorised as businesses, but not all. The others will be workers, with a whole set of ‘employment’ rights to go with them.
If you are paying people by invoice you need to know how this really works so that you can make sure you don’t get any unexpected bills from the Revenue (or an Employment Tribunal) in a few years time.
Don’t think this doesn’t happen, it happens all the time. Just as you start to get through those critical first few years and make a profit, you get a PAYE inspection and a bill for back tax. You can’t go back and charge all those clients more (as your labour costs were too low) and that’s your expansion capital, that longed for holiday, gone. Or worse, that’s the business gone!
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