UK Self employed director

[Ellie1234]

Hi

Can a limited company director work on a self employed basis and invoice the limited company for work carried generating sales income for the company

The above is in a situation where the director works from home and uses their own car, phone etc and files self assessment returns showing income paid by the limited company as turnover and deducts the cost of mileage, phone calls etc in the return

I have read the above is not permitted by HMRC but what will they do both to the company and the director if they know that the director is claiming self employment.

E

 

[Becky]

Whether someone is treated as employed or self-employed is not clear cut and depends on the nature of the engagement between the parties involved. There is some useful information here:

https://www.gov.uk/government/collections/employed-or-self-employed

what will they do both to the company and the director if they know that the director is claiming self employment.

If HMRC determine that an individual should have been treated as an employee, then they can go after the employer for historic PAYE and NICs, on a grossed up basis, going back 4 years (I think). Grossed up basis means that they will treat payments made to the individual as net of PAYE/NICs, therefore the bill is a lot bigger. When they have worked out the PAYE/NIC due they may also charge a penalty, being a percentage of the total - eg 5%.

In short, it can be very costly to incorrectly treat someone as a self-employed contractor when they are actually an employee!