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bigduckontax
bigduckontax, Accountant
Category: Tax
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I have a limited company and I want to subcontract a small

Customer Question

I have a limited company and I want to subcontract a small proportion of the work I am contracted to perform to a former colleague who is self-employed. My accountant said I would have an issue trying to prove my colleague was self-employed vs being an employee of my limited company, and if the latter, I would need to obviously deduct tax and NIC among other things. As this person is self-employed is it up to me or them to prove their employment status if required and is this really an issue? Any guidance would be greatly appreciated.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
If your sub-contractor can produce to you evidence that he is self employed then I would submit that you are in the clear and need not operate PAYE. This would cover you in the event of some future inquiry by HMRC. Always remember the acid test; an employee can be told what to do and how to do it, whilst a contractor can be told what to do, but not how to do it. If the relationship passes this test then that is an additional string to your bow to treat him as self employed.
I do hope I have helped you with your question.
Customer: replied 2 years ago.

Hi Keith,

Chris here. Thanks very much for your rapid and clear response. I really appreciate it. In terms of evidence, presumably that would be their self-assessments, right? Anything else? That's a good point. I mean that would be more than enough evidence I should think. Is there anything in particular you would expect to see in their invoice to me? OR can it simply be "[services] completed on behalf of [limited company] by [name of colleague] for October 2014

In your experience would the HMRC ever want to know what work it was in particular?

Cheers

Chris

Expert:  bigduckontax replied 2 years ago.
I would expect to see a normal invoice for services to your company without any special annotations. The possibility of this documentation being investigated is rather remote.
I doubt if the detail of the work sub-contracted would ever be needed.
If your colleague can show you a copy of his HMRC self assessment tax computation this would further strengthen your position of treating him as self employed.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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