Freelancing

[peter]

I thought that this may be of interest to many. Hope it is, anyway.

[gareth]

I didn't realise this was also on the web site - WL sent it out to everyone on their freelance list a few months ago. Well worth reading - there's some useful info in there.

[Guest lightnix]

Very interesting and very useful. It might be worth pinning this thread for a while, if not permanently.

 

I hadn't received this letter myself, due to not being on WLs books. The White Light information pretty well says it all. The point about accepting a Purchase Order in writing is spot on, a PO is only an offer of a contract, not an actual booking.

 

The only things I would take issue with are...

 

1. Charging 12% to the contract of anyone who is taxed under PAYE, in order to pay the Employers NIC seems a bit strong.

2. While becoming a Ltd. Co. might be an option worth considering for people like LDs and operators, I personally wouldn't recommend it for technicians, due to the IR35 implications.

3. There is no mention of freelancers providing a quote for their services. AFAIK an hourly / daily rate is a strong indicator to the taxman of employee status, taxable under PAYE. Such a quote should include all expenses.

 

Apart from that, I applaud any effort by companies to clear away the mystery surrounding freelancing. Well done White Light for biting the bullet on this one.

[Bryson]

[Enagage Pedant Mode]

 

You will in the future be asked to provide a quotation. You may need to demonstrate and generate a business transaction as follows:

 

• The Company will detail the contract to you (initial enquiry).

• You quote the company a price for completing the work

• The Company accepts your quotation, even if it is a verbal quotation (by sending you a purchase order)

• You complete the sub contracted project and submit an invoice for payment.

 

Per diem expenses and travel allowances that form part of a particular contract must be included within the price agreed for the project. The point here is that although the company and you may both use a daily rate for labour / food / transport to calculate and establish a contract value – it is up to you to quote a single figure to the company to complete the services that have been detailed. Contracts will therefore need to be awarded on a project specific basis and will not take the form of a "daily rate x number of days plus travel and per diems".

 

[Pedant mode off]

 

 

Sorry 'nix.

 

I agree with you points 1 & 2, though

[Guest lightnix]

Oops, missed that somehow. You must have read it better than I did.

[Guest lightnix]

I've just been re-reading the info here and noticed one small thing...

 

[PEDANT]

 

The bit that says...

• The Company will detail the contract to you (initial enquiry).

• You quote the company a price for completing the work

• The Company accepts your quotation, even if it is a verbal quotation (by sending you a purchase order)

• You complete the sub contracted project and submit an invoice for payment.

... has a bit missing. It should go...

• The Company will detail the contract to you (initial enquiry).

• You quote the company a price for completing the work

• The Company accepts your quotation, even if it is a verbal quotation (by sending you a purchase order) this represents the offer of a contract - it is NOT a "booking"

• You formally accept the Purchase Order, in writing, at which point a legally binding contract exists between you and the Company.

• You complete the sub contracted project and submit an invoice for payment.

[/PEDANT]

[Jemma]

I know I'm coming to this thread EXTREMELY late, but have been away from the UK for a while, now gearing up to come home.

 

Basically as a Stage Manager (treated by many theatres as self-employed), I would struggle to meet many of the criteria regarding TRUE self-employment.

 

My question is this: if I can only get work from companies who insist upon my self-employed status & I pay all my tax & NI as such, am I liable for any difference, or if push comes to shove, is it the company in the poo?

[MikeR]

I may be being dense (probably am) but I don't understand your question. If you are freelance & you only take work from companies which insist on self employed status & you pay your own NI & Income Tax then what difference are you referring to?

[andy_s]

I may be being dense (probably am) but I don't understand your question. If you are freelance & you only take work from companies which insist on self employed status & you pay your own NI & Income Tax then what difference are you referring to?

<{POST_SNAPBACK}>

I don't know the exact circumstances, but actors and stage management working under Equity contracts have in the past been seen by IR as having a "contract of employment", and after a court test case a few years ago, a dispensation was allowed that meant that such people were treated as "self-employed for tax purposes", meaning that tax was not deducted at source. However, Class 1 NI deductions were still made as if the person was an employee. (I guess this was to safeguard unemployment benefits and state pensions). I suppose under these circumstances that someone may find themselves in a situation where they think they've been paid "nett", but their employers haven't actually passed the tax contribution on to the IR....

[Guest lightnix]

Firstly, you need to get an accountant to register you as self-employed and get you a Unique (?) Tax Reference (UTR) number, which replaces the old Schedule D number. Once you've done this, get the accountant to provide you with a "To Whom It May Concern" letter, which you can copy, confirming your self-employed status. You'll also need to set up a Direct Debit to pay Class 2 NI contributions. The accountant can help you with this. Don't forget that if you are working as a self-employed person, you need to notify the Inland Revenue within three months, or face a £100 penalty (see also the PSE1 page)

 

Self-employment is governed by the IR56 Regulations (PDF version available here). In a nutshell: under IR56 it is the client/employer's responsibility to ensure that the terms and conditions under which you are engaged meet the criteria. If they don't and the Taxman decides you have a Contract of Service (employed), rather than a Contract for Services (self-employed), then the client/employer is liable for any outstanding Tax & NI (not you :( ). If you are trading as a Ltd. Co., then the IR35 regs apply, which are basically the same thing, except that you bear the responsibility / liability for the outstanding tax.

 

AFAIK, the Revenue tried to get all the luvvies, twirlies & SMs on PAYE about ten years ago, but were successfully foiled by Equity. At that time, Income Tax was not deducted, but NI was <_< However, some twirly managed to get this deemed unlawful, so that the Revenue had to offer to hand back all the NI they'd swiped. I can't honestly say whether that position has changed since.

 

Hope that helps a bit. In summary: get an accountant (I'll give you the details for mine if you PM me) and (if you are a member) have a chat with Equity, they'll be able to help.

[bob_lamb]

Been self employed shiney tech type for 9ish years now. Reading this confirms what I have suspected for many of them....is it F!"£$%^& worth it???

[Big_ gray]

Firstly, you need to get an accountant to register you as self-employed and get you a Unique (?) Tax Reference (UTR) number, which replaces the old Schedule D number.

<{POST_SNAPBACK}>

 

You don't need to pay an accountant his pound of flesh (£50 min and going up quickly) to get your UTR just ask your local tax office, its free!

[Piers Shepperd]

How much a minute!!! I think perhaps that is not the industry average.

I would expect to pay £250 - £450 per year for an accountant depending on your circumstances. I'm sure my accountant spends one / two days per year doing all of my paperwork.

 

Seriously my accountant saves me far more in the tax I pay then the annual cost for the accountants services.

They are good for keeping an eye on any new regulations and possible allowances.

I've now stopped being self employed and started a limited company to help with my tax. A good accountant will review your income and advise on the best legal way of paying less tax.

 

Cheers,

 

Piers

[Andrew C]

How much a minute!!!

 

SNIP

Cheers,

 

Piers

<{POST_SNAPBACK}>

 

 

No no! £50 minimum is what was intended. (I hope!)

[gareth]

How much a minute!!! I think perhaps that is not the industry average.

I would expect to pay £250 - £450 per year for an accountant depending on your circumstances. I'm sure my accountant spends one / two days per year doing all of my paperwork.

 

Seriously my accountant saves me far more in the tax I pay then the annual cost for the accountants services.

They are good for keeping an eye on any new regulations and possible allowances.

I've now stopped being self employed and started a limited company to help with my tax. A good accountant will review your income and advise on the best legal way of paying less tax.

I'm in exactly the same situation as Piers - I keep my own records, and at the end of the financial year my accountant takes them from me and turns them into the documentation that the Inland Revenue want. This, along with a few odds and ends of advice during the year, don't cost a great deal, and my accountant's fees are way less than the tax liability that he saves me every year.

 

Like Piers, I also operate through a limited company - all my clients are invoiced by the company, which then pays me a monthly wage, pays me contributions towards motoriing costs, pays for any business-related expenditure, etc. It's the safest way to do it these days, in terms of keeping the taxman off your back - for anyone who's currently operating as self-employed it's well worth looking into.