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  • Tax - Checklist of employment status factors
    Checklist of employment status factorsIf HMRC decides that an individual contractor should have been treated as your employee, it will ask you to pay the tax and NI that should have beendeducted from their pay through PAYE, plus the employers' NI.  Therefore, it's important to have documentation on file to show why you treated the worker as self-employed.Employed or self-employed?You're not free to choose the status of individuals who work for you. HMRC aggressively challenges the status of self-employed workers...
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  • Tax - Consultancy agreement
    Consultancy agreementIf you're a one-man service company, then you could be caught by IR35 if HMRC deems the contract between you and the client as one of employment rather than self-employment. Having a consultancy agreement in place can provide evidence that IR35 should not apply.One-man service companiesClients will often only deal with freelancers who operate through limited companies. This is because it will be the freelancer's limited company, not the client, who will be liable to any PAYE or NI (under...
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  • Tax - Contract for services
    Contract for servicesHMRC's aim is to reclassify freelancers such as consultants as employees and insist that PAYE and NI is due on the total amount paid to them. Having a realistic contract for services in place will provide evidence that the engagement is one of self-employment.Contracts for servicesContracts for services need to be distinguished from contracts of service (i.e. of employment). Under a Contract for Services you can only order what is to be done, while in the case of an employee under a contract...
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  • Tax - Exchange of letters
    Exchange of lettersDuring routine compliance visits HMRC has asked companies for the names and addresses of any freelancers they use. Protect yourself with an exchange of letters between your company and the freelancer.Proving you've considered statusHMRC would be delighted to be able to reclassify your consultants/freelancers as your employees, as it could then insist that PAYE and NI is due on the total amount paid to them. One way to prevent this problem is to implement an Exchange of Letters with the freelancer...
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