PAYE/CIS/Invoice

jilt

I've just had a call from a sole trader, been registered self employed for six months, not actually invoiced for any work yet but has been doing some work for his dad. He wants to declare the income from his dad but dad has no PAYE or CIS scheme at present.

Would he get away with just invoicing his dad for his services? It's been regular work for him so far and I would think he'd have a hard time convincing HMRC he is not an employee.

Any advice would be much appreciated.

Poodle

Hi Jilt

Son will be fine he can invoice for the work and pay tax through SA.

His dad has the problem since it is always up to the one offering the work to decide on the working relationship in respect to CIS or PAYE, inform HMR&C and account for tax deductions, returns etc accordingly.

jilt

Thanks Poodle, if his dad had made the enquiry would you advise him to set up a PAYE scheme?

A-Vic

Hi Jill

I think this would be your only option as it would bring more problems for his dad as not registered for CIS and filed any subcontractor returns would then make him libel for late filing charges.

Heres a link with Info for CIS which i know you probley already know anyway

http://www.hmrc.gov.uk/cis/sub-reg-obs.htm

jilt

Thanks Vicky, to be honest if his dad was to register for CIS I wouldn't expect him to use the ESI tool to check his son's status and would just go straight to verify him, or would just ignore the ESI if its result was he was an employee.

He'd still be fined for registering late for PAYE but I think that's his best option. Anyhow I can only advice the son and they'll make their own minds up. Son said his dad didn't want to employ him cos of all the extra work so I did offer my services to do his payroll for a very modest sum but I think it's moe likely he doesn't want the cost of NI and holiday pay.

groundy

I wouldn't pay too much attention to the ESI tool with regards to self employed status it is very flawed.

jilt

groundy wrote: »

I wouldn't pay too much attention to the ESI tool with regards to self employed status it is very flawed.

Ok thanks Groundy, looks like he's going the PAYE route after all.

A-Vic

jilt wrote: »

Ok thanks Groundy, looks like he's going the PAYE route after all.

sounds the best option to me

farmergiles

The son could always become a Ltd Co and have a revolving contract with his father. As long as he is allowed substitution and has to put right any mistakes in his own time, at his own cost then the father doesn't need to go down the paye route. The son would have to make sure he uses his own transport and tools and hire in any specialist tools. His company would then invoice his father and the son would then be an employee of his own Ltd Co. The contract must not show any restriction on the work done by the sons company.

The father, if in the construction industry, could then register for CIS(not backdated). The previous work done by the son could be invoiced and declared on his S/A return