craig1410
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 posted on 17/11/08 at 09:50 PM |
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Potential Self Employment - Advice needed.
Hi guys,
I could use some sound advice through unofficial channels to help me decide whether to take this to the next level. I just want to have an idea of
where this bus is going before I get on...
I'm employed full-time as a computer consultant and I am considering supplementing this with some additional IT related work on the side. I have
been approached by an old friend who runs a company and he needs some programming work done in a hurry. He needs me to provide invoices for any work I
do because he in turn is invoicing his customer (he runs a manufacturing consultancy and IT is only a necessary evil to him).
On one hand, this could just be a short term gig (£1-2k tops) and there is a temptation to just send out some invoices and accept the BACS transfer of
cash and have a nice Christmas...
On the other hand what I should be doing (I think) is registering with HMRC as self employed but it seems like a lot of hassle to go to for what could
be a one-off piece of work. Having said that, I am hoping to get on the bandwagon with Apple iPhone software development and may need to declare
earnings from that in the future.
My question's are not so much to do with the rights and wrongs of the above but more to do with what is considered "normal"? Would I
be considered to be dudley-do-right by setting up as self-employed for the sake of £1-2k? Would I be crazy to think that HMRC wouldn't come
after me, especially with a paper trail to follow? Would being self-employed in addition to being employed full-time have any implications for
credit/mortgage etc in future? I have a daughter who will be going to university in a couple of years time - will self-employed status affect me in
any way (in Scotland)?
Another thing which crossed my mind is whether I actually need to register as self-employed. Can I just declare the income on my self-assessment tax
return as miscellaneous income and then pay the tax manually at year-end?
Sorry to ramble on but I have found over the years that when I try to do the right thing I usually end up worse off and would appreciate any advice
you may be able to offer.
Many thanks,
Craig.
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hillbillyracer
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| posted on 17/11/08 at 10:03 PM |
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I've no answers for you but I'm interested in what answers you get!
I've no intention of leaving my job but I've done bits & bobs for mates which is good for beer money but I'm getting offered
more which pays better now which raises a few points:
They have a business & dont want to pay with cash.
Cash is used less & less in general.
I'm trying to save toward a house & so would like to bank some!
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blakep82
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| posted on 17/11/08 at 10:11 PM |
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tax tax tax...
________________________
IVA manual link http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1081997083
don't write OT on a new thread title, you're creating the topic, everything you write is very much ON topic!
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rusty nuts
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| posted on 17/11/08 at 10:11 PM |
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One of my brothers has a full time job but also works evenings and weekends on a self employed basis, I was self employed for 20 years . The best
advice I could give to you would be have a word with a good accountant.
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StevieB
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| posted on 17/11/08 at 10:19 PM |
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I've been self employed for just over a year now (well, director and owner of a limited company, to be technically correct in tax terms  )
Frst rule of business - do the work and get paid!
Only take 60% of what you earn and then you have loads of time to sort out the businss and taxation side of things and you will have more than enough
in reserve to cover the liabilities - you'll actually end up getting a decent amoutn left over, but (I pefer, anyway) it' best to take a
bigger libility povision than required and have a surplus put aside than it is to come up short and scramble round for i at the lst minute!
If you get more work, a good accountant is worth twice the fees they charge to keep you tax efficient and out of the HMRC beady glare!
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nick205
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| posted on 17/11/08 at 10:23 PM |
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I'm no expert here, but you might want to consider setting up a Ltd company - e.g. "craig1410 ltd"
This should mean you can invoice for work done by the "company" as well as creating some tax deductable "costs" - e.g. travel,
phone, internet etc.
It should also allow you to separate your full time employed work/income from your other activities.
As above, a good accountant will do you well and should minimise any tax liabilities.
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David Jenkins
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| posted on 17/11/08 at 10:25 PM |
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It's not easy, if you want to be 100% squeaky-clean, legally. There are 2 sides to this issue - the worker (you) and the employer (your friend).
You will have to consider how you will pay tax and national insurance on what you earn. A good accountant can advise, but you may have to consider
registering as a limited company, or as a sole trader. Both require the return of annual accounts, but those for a sole trader are MUCH cheaper - but
you may have to be a Ltd Co.
Your friend, as your employer, may have to pay employer's contributions for national insurance - sometimes much more than you will pay. He may
also end up with responsibilities for you in various ways - again, a good accountant is very useful.
I used to be a contractor in IT, but around 2000 it got far too complicated as the government over-corrected for the rip-offs that some contractors
were perpetrating. If you want to see what I mean, try Googling for 'IR35'.
Also here
I'm now an employee for a largish corporation earning less money than I did as a contractor - but I'm very happy to be far away from all
that hassle.
[Edited on 17/11/08 by David Jenkins]
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craig1410
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| posted on 17/11/08 at 10:27 PM |
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Hi,
Yeah I've already done some of the work but I'm about to submit my first invoice and effectively I'm at a junction in the road...
I've always paid my way in this world and never seem to get any sort of break (tax or otherwise) so I just wanted to make sure I wasn't
being a prude by declaring the income. I'm sure HMRC have bigger fish to fry but knowing my luck I'd show up on their radar and get
bitten!
Keep the advice coming guys - I suspect that in the current economic climate there will be more than me looking to earn extra cash...
Cheers,
Craig.
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David Jenkins
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| posted on 17/11/08 at 10:29 PM |
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Just remember that it's better to fall foul of the police than upset HMRC! For a start, they have more powers of search and arrest, and can be
complete bar stewards for many many years if they take the fancy....
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craig1410
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| posted on 17/11/08 at 10:34 PM |
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quote:
Originally posted by David Jenkins
It's not easy, if you want to be 100% squeaky-clean, legally. There are 2 sides to this issue - the worker (you) and the employer (your friend).
You will have to consider how you will pay tax and national insurance on what you earn. A good accountant can advise, but you may have to consider
registering as a limited company, or as a sole trader. Both require the return of annual accounts, but those for a sole trader are MUCH cheaper - but
you may have to be a Ltd Co.
Your friend, as your employer, may have to pay employer's contributions for national insurance - sometimes much more than you will pay. He may
also end up with responsibilities for you in various ways - again, a good accountant is very useful.
I used to be a contractor in IT, but around 2000 it got far too complicated as the government over-corrected for the rip-offs that some contractors
were perpetrating. If you want to see what I mean, try Googling for 'IR35'.
Also here
I'm now an employee for a largish corporation earning less money than I did as a contractor - but I'm very happy to be far away from all
that hassle.
[Edited on 17/11/08 by David Jenkins]
Hi David,
Yes I am familiar with IR35 and the nightmare that it has caused many IT contractors.
As for employer's NI, I didn't think that this would be required for my "customer" as he is simply contracting me temporarily
to perform some software consultancy. He is not my employer in the same way that my regular employer is and doesn't do PAYE etc.
Sole Trader is the way I was intending to go because as I said, this could be an isolated piece of work and wouldn't justify the costs
associated with a Ltd company. As far as I am aware I don't need to employ an accountant as a sole trader, I just need to do self assessment tax
returns. Is that not correct?
Nick, craig1410 Ltd - now that's a catchy name... 
Cheers all,
Craig.
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eznfrank
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| posted on 17/11/08 at 10:37 PM |
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I have no idea how to go about registering as self employed or whether or not you would fall under their radar.
However, I do know that if you did get caught and they saw this post then it would show you were of "mens rea" or guilty mind if you
prefer.
The likelihood of an investigation going that far is quite remote but not impossible. You also need to consider what you're current employer
might say if they found out. Alot of contracts forbid 2nd "same type" jobs or directorships.
And as David says above HMRC are not the guys to upset - I deal with them alot and they can sometimes be elbow length rubber glove boys if you get my
meaning!!!
Ok - so that's probably a "goodie two shoes" line of thinking but that's how I earn my car pennies.
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sonic
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| posted on 17/11/08 at 10:40 PM |
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Hello
Look up a company local to you called TAX ASSIST DIRECT there are loads scattered all over the country.
The first meeting will be free and good sound advice,if your not confident let them run your books for you as it doesnt cost alot which is gauged on
the complexity of your trade.
I have owned and run two businesses with my wife and employed more than 20 staff,they did all the wages etc and charged around £40 per month.
Including in that they did my tax returns.
Never had any problems with them.
They will also advise on Sole trader/partnership say with your wife or Ltd company.
I found a partnership with my wife was best for me due to allowances etc
Hope that helps
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craig1410
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| posted on 17/11/08 at 10:49 PM |
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quote:
Originally posted by eznfrank
I have no idea how to go about registering as self employed or whether or not you would fall under their radar.
However, I do know that if you did get caught and they saw this post then it would show you were of "mens rea" or guilty mind if you
prefer.
The likelihood of an investigation going that far is quite remote but not impossible. You also need to consider what you're current employer
might say if they found out. Alot of contracts forbid 2nd "same type" jobs or directorships.
And as David says above HMRC are not the guys to upset - I deal with them alot and they can sometimes be elbow length rubber glove boys if you get my
meaning!!!
Ok - so that's probably a "goodie two shoes" line of thinking but that's how I earn my car pennies.
Hi,
As I said, I have always played by the rules and am not looking to rip off the HMRC, much as I do often question the use to which my tax gets put at
times... 
I was aware before starting this thread that it could potentially be used against me which either means I am stupid or that I pretty much knew which
way I was going to go with this right from the start. I am not stupid!
Sonic, thanks I'll look up Tax Assist Direct as you suggest.
David, further to your comments about possible NI liabilities for the company I am working for - I think as long as I can prove that I am
self-employed and not a contractor then it should be okay. From a quick glance of the criteria I think what I am doing would be considered to be
self-employment but I'll look into it further.
Just for the record, at the moment I have not accepted any money for my work so all I have done is help a friend. This is why I want to get this
sorted now because I still have the option of walking away.
Cheers again to all,
Craig.
[Edited on 17/11/2008 by craig1410]
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MikeR
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| posted on 17/11/08 at 10:50 PM |
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I've had to deal with an investigation HRMC undertook on one of my contractors (IR35). I wasn't under investigation and I was
scared!!!!!
They are very nice people doing a job where being an absolute git is the way to be. So guess what, thats what they do. The worst bit is the laws are
open to interpretation in some areas so what they decide is what goes - which means you have two choices play it safe or sail close to the wind. Hence
a good accountant is essential, the good ones know how close to sail.....
I'm also generally interested as i've been offered some cash for taking some pictures. Wasn't intending charging much but i would
like it to become a sideline. Luckily everything will be cash so its not too much of an issue. As for my company, they are happy for you to do
'other' work as long as it
a) doesn't interfere with your day job
b) does not make use of company equipment
c) doesn't compete with the company.
As the chances of me getting a license to deal drugs for a living in a legal manner are pretty slim I can get away with almost anything.
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craig1410
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| posted on 17/11/08 at 10:56 PM |
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quote:
Originally posted by MikeR
As for my company, they are happy for you to do 'other' work as long as it
a) doesn't interfere with your day job
b) does not make use of company equipment
c) doesn't compete with the company.
This pretty much the way my company would view it. Strictly speaking I've never actually received a contract (just my original offer of
employment) so I've not explicitly agreed to anything...
Although my (potential) sideline is in the same industry, I am certainly not competing with my employer, not doing any of my own work in company time
or using company equipment or intellectual property etc etc. Also, my CEO is an entrepreneur through and through and I'm sure he would
congratulate me on my initiative. I hope so anyway...
Cheers,
Craig.
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MikeR
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| posted on 17/11/08 at 10:57 PM |
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just found this,
http://www.bytestart.co.uk/content/19/19_1/self-employed-tips.shtml
and this
http://www.hmrc.gov.uk/startingup/working-for-yourself.pdf
(yes i know they're not proper links, cut and paste)
Don't be so sure about your company - your boss, if he's any sense will take a close look at what you do. He might be able to claim you
owe him something, he's paid for your training or something.
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greenwood03
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| posted on 17/11/08 at 11:01 PM |
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not a tax expert but run my own IT recruitment company. i'd say that for a one off piece of work that you shouldnt need to register as self
employed, just declare the income when doing yr self assesment. or you could talk to a managment compnay that specialises in contract labour,
i'd imagine that you would offset a portion of the income on expenses ie/ travel, communication, pc hardware/software, etc etc one point to
consider aside from the tax is perhaps to make sure that you do this on the right basis with yr friend, in terms of charging a realistic amount as it
sets the standard for further engagements. i've done the same with old work colleagues when i needed support and wished that i'd agreed a
sensible hourly rate as i've had wild variances in cost from 'give me a drink' through to some figures at which i could have used a
top contractor......good luck, hope that it leads to other things for you.
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plantman
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| posted on 17/11/08 at 11:02 PM |
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here's my 2ps worth...........
i did exactly what you are proposing to do worked for someone whilst building up my own business on the side.
If you are seriously considering setting up on your own in the end then it would be best to see an accountant, but you don't have to just yet
...... keep all your bills whatever it costs to do your thing you would be amazed at what you can resonably claim you might have had to visit your
customer 20 times ie loads of fuel, pencils,pens, electric,phone calls on and on this can be offset against your tax.
you can take these in to the tax office and they will do a self assessment on you such a small amount they will probably do it there and then.
...............but you could wait and see if they catch up with you.
secondly for tax purposes
1 sole trader
2 partner
3 ltd company
3 is most efficent for reducing tax if your profits are in excess of 50k but cost more set up and administer and the banks don't like it
2 partner is easy to set up and is best for tax with 40-50k profits.
best advice if you are serious about setting up on your own is to seek a good accountant, our as save us a lot of money over the years and after 2 tax
office investgations they have not found anything to moan about.... best of luck
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craig1410
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| posted on 18/11/08 at 12:02 AM |
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@greenwood03,
Some good advice there - thanks.
On the rate issue - I have already agreed a rate with my mate and to be honest at the time I was thinking in terms of net not gross so I probably
should have asked for more. On the other hand I know that this project is not a big money spinner for my mate so I would probably have priced myself
out of the job. Also, at the start I was thinking he needed a few hours worth of help but it has turned into a bigger job than expected which is
partly responsible for my rethink.
I don't mind so much paying the tax - I see it a bit like doing overtime for my main employer. I just want to make sure that I don't fall
into a big bear trap and end up with HMRC crawling all over me.
@Plantman,
Again some food for thought - I had considered the option of registering as self employed and then just collecting records over the next year with a
view to sorting it all out at the end in my tax return. This is an attractive option in many ways as I've got no real idea how much actual
business I'm going to do. I'm pretty confident I will come in under the Class 2 NI limit unless I strike it lucky with a killer iPhone
application (could happen-you never know...)
The trouble with waiting to see if they catch up with me is that they can take (as I understand it) up to 100% of unpaid tax as a fine (eg. £100
unpaid tax + £100 fine) plus interest. I'm not keen on that scenario... 
Cheers,
Craig.
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craig1410
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| posted on 18/11/08 at 12:50 AM |
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Hi,
Just found this on moneysavingexpert.com:
quote:
Casual earnings
Q. When do casual earnings make you self employed?
One-off freelance income and profits from isolated literary or artistic activities can go in section 13 of the Tax Return. There's a full list
of examples of such income in the notes to the self assessment return.
If you are selling goods or services with any regularity or if it looks like a business – you are self employed. The official definition is “carrying
on a trade, profession or vocation”. Then you have to register for National Insurance and tax and complete the self-employment pages of the
return.
Where's the dividing line? I don't know, but I can't imagine anyone getting very excited if the income earned is well under the
class 2 National Insurance small earnings exemption limit of £4,345 a year.
The main thing is that the Revenue and civil society expect you to join the tax-paying club, and there's no lower limit for that.
Source: http://www.moneysavingexpert.com/protect/tax-questions-answered
This sounds sensible albeit subjective. Does computer software come under "literary works"? Would seem sensible if we are only talking
about £1-2k maximum (well under the NI Class 2 limit) to just declare this income in my personal tax return. Would save a whole lot of admin and
paperwork and I can worry about starting a business proper at a later date.
Will look into this I think.
Cheers,
Craig.
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Simon
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| posted on 18/11/08 at 12:55 AM |
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Hi Craig,
In really simple terms, first thing I'd do would be to confirm with your employer what you'll be doing. Once he's happy, phone the
tax office and let them know your proposals.
They may not be a particularly endearing bunch but at the end of the day, we pay their wages, so it's in their interests to help.
You may find it'll be a simple case of adding/declaring the additional income to your year end tax return (if you're paye, and don't
suffer a tax retrun, they'll probably send you one for a few years, even if you don't do the extra earnings thing again).
How's the car
ATB
Simon
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craig1410
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| posted on 18/11/08 at 01:07 AM |
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Hi Simon,
When I saw the email to say that you'd replied the first thing that went into my mind was, "I hope he doesn't ask how my car is
doing..."
Yes I agree with your appraisal of my tax situation and I'm pretty confident that my employer will be okay with it. If not then they only need
to ask me and I'll stop.
Cheers,
Craig.
ps. My car has not progressed... Hoping to make some progress over christmas period when I'm on holiday for a couple of weeks.
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David Jenkins
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| posted on 18/11/08 at 09:09 AM |
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I should add one thing about the accountant - if you employ a good one who's known by the local IR office to be straight and true then the
powers-that-be are very likely to leave you alone.
I was very lucky in that respect - in 10 years or so I had one query from HMRC, which my accountant dealt with immediately. Never heard any more.
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JeffHs
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| posted on 18/11/08 at 01:52 PM |
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Shortly after I took early retirement my old company asked me to do a special exercise. More by cock up than design I became self-employed (easier for
them). The IR office couldn't have been more helpful, I registered with them as self-employed, they offered me a half day course on the ins and
outs of the law, allowances etc. I've been called back to work several times since. Now I just pay my self employed stamp quarterly and complete
a tax form each year - apart from the inefficiencies built into our over-complicated tax system, no problems at all.
Jeff
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brashhighlander
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| posted on 18/11/08 at 02:19 PM |
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Hi Craig
I am a Chartered Accountant and if you want I can email you all the necessary paperwork you need to complete to become registered as self employed.
Its a whole two page document
I could go into the whole it is better to be this or that with regards to tax, but I would just end up boring everyone here.
If you want help (free of course) then pm me and I will give you my contact details.
Regards
Jim
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