Paying casual labour

Discussion in 'UK Accountancy' started by Ronald Raygun, Jun 14, 2004.

  1. Stanley Beamish wrote:

    > My wife is self-employed and occasionally needs to employ casual labour.
    > What is the best way to account for this, preferably without incurring the
    > wrath of the inland revenue, but without having to get lumbered with
    > declaring the labour as employee(s). Is it acceptable to pay the
    > person cash in hand, and write it off as a business expense, for example.


    Of course. The "casual labourer" is in this case acting as a self
    employed provider of a service. Cheque would be better, of course,
    as it would make it less likely that this person would himself be
    diddling the IR, and if she suspects this might be happening, she
    could be an accessory - aiding and abetting fraud. She *is* getting
    a receipt, isn't she?
     
    Ronald Raygun, Jun 14, 2004
    #1
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  2. Ronald Raygun

    Doug Ramage Guest

    "Ronald Raygun" <> wrote in message
    news:jlezc.4107$...
    > Stanley Beamish wrote:
    >
    > > My wife is self-employed and occasionally needs to employ casual labour.
    > > What is the best way to account for this, preferably without incurring

    the
    > > wrath of the inland revenue, but without having to get lumbered with
    > > declaring the labour as employee(s). Is it acceptable to pay the
    > > person cash in hand, and write it off as a business expense, for

    example.
    >
    > Of course. The "casual labourer" is in this case acting as a self
    > employed provider of a service. Cheque would be better, of course,
    > as it would make it less likely that this person would himself be
    > diddling the IR, and if she suspects this might be happening, she
    > could be an accessory - aiding and abetting fraud. She *is* getting
    > a receipt, isn't she?
    >


    I fear that this might be a dangerous tactic, and could rebound. It is the
    employer's responsibility to operate PAYE and deduct NI, where appropriate.

    I have seen quite few successful businesses go bankrupt after the IR have
    done an audit. What looks like insignificant amounts of tax NI can balloon
    to huge figures once the IR have gone back 6 years and added interest and
    penalties.

    It is most unlikely that these people are self-employed - casual *employees*
    seem much nearer the mark. You probably need to get them to complete form
    P46

    The IR do a cd-rom with the PAYE procedures on it. It is available free of
    charge.

    I have a spare one for 2004-05, if you are interested.
    --
    Doug Ramage
     
    Doug Ramage, Jun 14, 2004
    #2
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  3. "Stanley Beamish" <> wrote in message
    news:eek:1ezc.67000$...
    > without having to get lumbered with declaring the labour as employee(s),

    or
    > by having to pay tax on the amount paid. Is it acceptable to pay the

    person
    > cash in hand, and write it off as a business expense, for example.
    >
    > The amounts I'm talking about is a few 10's of pounds, once or twice a
    > month.
    >


    Can you quantify the amount more precisely ? It does matter, as
    the amounts might not be above PAYE & NIC thresholds.

    I suspect you're guilty of GUAP (Generally unacceptable
    accounting practise) :) But this doesn't necessarily mean you're
    risking huge fines.

    Give us a few numbers ?

    --
    Edward Cowling - London - UK
     
    Edward Cowling, Jun 14, 2004
    #3
  4. Ronald Raygun

    Simon Guest

    "Stanley Beamish" <> wrote in message
    news:eek:1ezc.67000$...
    > Hello,
    >
    > My wife is self-employed and occasionally needs to employ casual labour

    (not
    > necessarily the same person each time). What is the best way to account

    for
    > this, preferably without incurring the wrath of the inland revenue, but
    > without having to get lumbered with declaring the labour as employee(s),

    or
    > by having to pay tax on the amount paid. Is it acceptable to pay the

    person
    > cash in hand, and write it off as a business expense, for example.
    >
    > The amounts I'm talking about is a few 10's of pounds, once or twice a
    > month.
    >
    > Cheers,
    > SB
    >


    Dont call it something its not. If its casual labour call it that. It gets
    very complicated if you dont.

    On the other hand, you dont have to get all burucratic about it, yes, a bit
    funny coming from me.

    Edward points out below that the value of the payments is important and he
    is dead right. How much and how often is the factor.

    At the very least make a record of the name and address of the person paid.
    If they do not earn more than the tax and NI threshold in any one pay period
    and not more than £100 in the year, then that is the end of the matter.

    If its more than that, then get the Employers CD Rom and follow the sequence
    in the guide. in the end, its a lot cheaper than cutting corners and getting
    caught out.

    Simon
     
    Simon, Jun 14, 2004
    #4
  5. Hello,

    My wife is self-employed and occasionally needs to employ casual labour (not
    necessarily the same person each time). What is the best way to account for
    this, preferably without incurring the wrath of the inland revenue, but
    without having to get lumbered with declaring the labour as employee(s), or
    by having to pay tax on the amount paid. Is it acceptable to pay the person
    cash in hand, and write it off as a business expense, for example.

    The amounts I'm talking about is a few 10's of pounds, once or twice a
    month.

    Cheers,
    SB
     
    Stanley Beamish, Jun 14, 2004
    #5
  6. Doug Ramage wrote:

    > I fear that this might be a dangerous tactic, and could rebound. It is the
    > employer's responsibility to operate PAYE and deduct NI, where
    > appropriate.
    >
    > I have seen quite few successful businesses go bankrupt after the IR have
    > done an audit. What looks like insignificant amounts of tax NI can balloon
    > to huge figures once the IR have gone back 6 years and added interest and
    > penalties.
    >
    > It is most unlikely that these people are self-employed - casual
    > *employees* seem much nearer the mark. You probably need to get them to
    > complete form P46


    When is a person who does work for you an employee, and when is that
    person acting in a self-employed capacity?

    In principle there is no difference between the service consumer (cum
    employer) being a business or a private individual, so consider the examples
    of engaging the services of a gardener or a window cleaner or a hairdresser
    who does house visits. They probably have dozens of other clients and to
    consider them to be employees of them all would be just daft, and a
    bureaucractic nightmare.

    Mind you, we had this old-fashioned (and old) cleaning lady in the
    seventies, and she made us go and buy National Insurance stamps at
    the post office for her to stick onto her card. None of her successors
    ever did.
     
    Ronald Raygun, Jun 14, 2004
    #6
  7. Ronald Raygun wrote:

    >> It is most unlikely that these people are self-employed - casual
    >> *employees* seem much nearer the mark. You probably need to get them to
    >> complete form P46

    >
    > When is a person who does work for you an employee, and when is that
    > person acting in a self-employed capacity?


    You ask the following questions. Answers for self employed in brackets.

    Do you yourself have to do the work rather than hire someone else to do it
    for you? [no]

    Can someone tell you at any time what to do or when and how to do it?
    Are you paid by the hour, week, or month? Can you get overtime pay? [no]

    Do you work set hours, or a given number of hours a week or month? [no]

    Do you work at the premises of the person you work for, or at a place or
    places he or she decides? [no]

    Do you have the final say in how the business is run? [yes]

    Do you risk your own money in the business? [yes]

    Are you responsible for meeting the losses as well as taking the profits?
    [yes]

    Do you provide the main items of equipment you need to do your job, not just
    the small tools many employees provide for themselves? [yes]

    Are you free to hire other people on your own terms to do the work you have
    taken on? Do you pay them out of your own pocket? [yes]

    Do you have to correct unsatisfactory work in your own time and at your own
    expense? [yes]
     
    Jonathan Bryce, Jun 14, 2004
    #7
  8. "Ronald Raygun" <> wrote in message
    news:4sozc.187$...
    >
    > When is a person who does work for you an employee, and when is that
    > person acting in a self-employed capacity?
    >


    The IR look at many factors to decide if a master/ servant relationship
    exists, and if the person is considered an employee.

    Is there financial risk, in that their hours of work fluctuate and there
    may be periods when not employed.

    Do they have a job title, desk space, use of company assets.

    Do they in fact work for more than one person.

    If someone works for you with a job title, has a desk and gets
    a regular wage, then they are an employee....put them on PAYE.

    --
    Edward Cowling - London - UK
     
    Edward Cowling, Jun 14, 2004
    #8
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