Self Employed Security Guard
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A self employed security guard has approached me about doing his tax return:
1) I'm surprised he's self employed as he works on a regular basis consequently I'm not really sure what to advise him regarding his 'employment' status
2) He says that he has relocated in order to be a security guard (although he's still paying rent in the place where he was originally living- it didn't occur to me to ask why!) and that he wants to know whether or not he can claim rent and subsistence in London as deductible expenses
3) He also wants to know if he can claim his motor costs (travelling to and from work) as a deductible expense against his income; he says that he uses the motor entirely for business
4) He also want to know if he can claim a deduction on income based on the cost of the motor; I'm assuming, if applicable, I would do this via WDA?
Any help with the following woould be much appreciated; I'm going to have to dig out my personal tax book and do some serious reading!
1) I'm surprised he's self employed as he works on a regular basis consequently I'm not really sure what to advise him regarding his 'employment' status
2) He says that he has relocated in order to be a security guard (although he's still paying rent in the place where he was originally living- it didn't occur to me to ask why!) and that he wants to know whether or not he can claim rent and subsistence in London as deductible expenses
3) He also wants to know if he can claim his motor costs (travelling to and from work) as a deductible expense against his income; he says that he uses the motor entirely for business
4) He also want to know if he can claim a deduction on income based on the cost of the motor; I'm assuming, if applicable, I would do this via WDA?
Any help with the following woould be much appreciated; I'm going to have to dig out my personal tax book and do some serious reading!
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Comments
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Don't wish to sound harsh but are you sure taking on this client is worth it? [nothing to do with client per se - but your skills base]
Now if you are going to refresh your Self Employment knowledge to then take on more clients of this type, then great. But for a one off - is there potential that unless your skills are kept up to date you could miss something opening you up to a future PI claim. e.g. cash accounting coming along next year and the rules for that scheme.
It's just a thought but I do tend to advise people to stick to what they know and refer on clients that are outside of their core knowledge. Accounting is a huge area - you can't know it all and setting out your scope for clients is IMO the best way for a smaller practice / sole practitioner.
I am sure that others will have different views. Good luck0 -
You don't need to worry about advising on employment status as that is the contractors problem not your clients. If HMRC deem him to be an employee there is no comeback on your client.
I would say travel to and from work is not allowable, as his place of work will be the site he offers security at and not his home, although I know plenty who would claim anyway.
Also think you would struggle to claim rent. Although he has relocated it is now his residence irrelevant of whether he'ss paying another rent.0 -
If he is definitely going down the self-employed route then yes you can claim the travel to the 'job' (not work as office is from home). He can also claim a proportion of his rents/motor that relate to his business which he would need to somehow justify. EG I work in this room for x hours a year doing administration and my costs are x £ so this is my business element.
I would like to state that it does sound like he should be an employee, however please continue reading.
Whether or not he should be self-employed or employed is a completely different argument with loads of case law. The essence of this argument is that if your prospective client and his customer ( / employer) decide to both treat it as self-employment it is hard to argue against it as you just simply work backwards together to achieve this outcome (this is a well accepted view among tax professionals - as there tends to be issues when it is the worker who wants to be treated as an employee for the benefits etc not in a case like this where both parties are happy with the arrangement). They would need to ensure he is not getting paid holiday/benefits etc and that he is not being treated like any other employee (EG cheap canteen meals at work).
But to be honest, if you don't take on this client which is a fairly simple tax return etc and you are not going to gain this knowledge from work then how can you ever become a capable MIP?
As long as you research everything properly get external advise where appropriate (like now) the you will be fine. HMRC has some good guidance on their site.0 -
You don't need to worry about advising on employment status as that is the contractors problem not your clients. If HMRC deem him to be an employee there is no comeback on your client.
I would say travel to and from work is not allowable, as his place of work will be the site he offers security at and not his home, although I know plenty who would claim anyway.
Also think you would struggle to claim rent. Although he has relocated it is now his residence irrelevant of whether he'ss paying another rent.
Good point re: employer's responsibility to setup a PAYE scheme if applicable, I may have to ask CCH for their opinion as well just to double check
I don't think I can claim the rent as deductible, how would I show it in the accounts? I can't show it as office/shop rent because it isn't an office/shop, it's his residence. And I can't show it as use of home as he doesn't work from home.0 -
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If he generally spends no time at all at the premises then it shouldn't be in at all although if you are self employed HMRC don't ask for evidence to support a claim of up to £3PW.
There are other ways of presenting use of home such as rent and office costs.
Surely the argument should be to claim expenses where he actually is staying ( I assume he is living somewhere ). Whether this is London or where ever makes no difference. If you treat him as self employed then he WILL be able to make somesort of claim for use of home.
Again it's all about what you can reasonably justify, if in doubt go with a notional £3PW.
You can only claim expenses that are wholly and exclusively in the course of your business (claim percentage if both private and business), so it comes back to, do you follow the letter of the law to a T or do you claim what you think you can 'justify' or some might say get away with.
I have never seen HMRC come back to anyone who has a small amount of use of home (by the way it will be under premises expenses on his tax return) in their expenses.0 -
If he is definitely going down the self-employed route then yes you can claim the travel to the 'job' (not work as office is from home). He can also claim a proportion of his rents/motor that relate to his business which he would need to somehow justify. EG I work in this room for x hours a year doing administration and my costs are x £ so this is my business element.
I would like to state that it does sound like he should be an employee, however please continue reading.
Whether or not he should be self-employed or employed is a completely different argument with loads of case law. The essence of this argument is that if your prospective client and his customer ( / employer) decide to both treat it as self-employment it is hard to argue against it as you just simply work backwards together to achieve this outcome (this is a well accepted view among tax professionals - as there tends to be issues when it is the worker who wants to be treated as an employee for the benefits etc not in a case like this where both parties are happy with the arrangement). They would need to ensure he is not getting paid holiday/benefits etc and that he is not being treated like any other employee (EG cheap canteen meals at work).
But to be honest, if you don't take on this client which is a fairly simple tax return etc and you are not going to gain this knowledge from work then how can you ever become a capable MIP?
As long as you research everything properly get external advise where appropriate (like now) the you will be fine. HMRC has some good guidance on their site.
I wonder what HMRC would say.
The guy only works for the one employer (as far as I'm aware), was with the employer for a year under payroll which was then cancelled and then he was put onto self-employment, he now earns good money and as he doesn't actually work from home (as far as I'm aware) I wonder if HMRC would try and argue that the journeys that he is making are actually regular home-to-workplace journeys and therefore not deductible.
I'll have to get a copy of his P45 and P60 so I can declare those figures on the SA100.
Definitely going to go onto HMRC's website and ask the client a lot more questions, and if I do take this client on I'm going to have to give CCH a call as well.
I can't really think of any expenses that a self-employed security guard (who only works for the one employer as far as I'm aware) would actually incur; any ideas? No purchases, no uniform (company pays for), no business use of home, no advertising, no rent, no light and heat, training & subscription (I'll have to ask), subsistence/motor/travel (may not apply as HMRC may argue that he's not actually on a business trip), tiny bit of accoutancy, tiny bit of stationery, proportion of personal account bank charges (?), no subcontractors, no hire of plant, no repairs, proportion of phone (?); I'm going to have to ask him a lot more questions about what he actually does during his shifts and what are geniuine expenses incurred wholly, exclusively and necessarily for business.
Thanks for the replies; will keep you all informed0 -
Use of home as office, i.e. where he does all his admin, at the very least. Use a normal UoHaO calculation.
I don't think he has any admin, I'm not sure who records the hours that he does, I think his employer might record this and multiple by the relevant rate and then pay him.
I'll have to ask him exactly what he does and if he does any admin.
I guess putting through £3/week would not unreasonable.0 -
Also think you would struggle to claim rent. Although he has relocated it is now his residence irrelevant of whether he'ss paying another rent.
I agree but if he's self-employed and away from his normal residence then would it be possible to argue that he is on an extended business trip and therefore can claim the rent under the expense account "accomodation"?0 -
If he's self employed then his home or residence is effectively his office.
I would claim something like £152 UOH, say 50% of all his motor costs, mobile phone £5 a month, accounting fees and some PPS etc.
To be honest though it's not really worth him going SE as your not talking about a mega tax saving unless his empoyer insists he is to be SE.0 -
If he's self employed then his home or residence is effectively his office.
I would claim something like £152 UOH, say 50% of all his motor costs, mobile phone £5 a month, accounting fees and some PPS etc.
To be honest though it's not really worth him going SE as your not talking about a mega tax saving unless his empoyer insists he is to be SE.
Could a robust arguement be made that because he's self-employed and working away from his normal residence (that he is still paying rent on) that his London rent is "accomodation" and food is "subsistence"?
Also, could a robust arguement be made that because he's only got one 'employer' (as far as I'm aware) that home-to-workplace journeys are not allowable?0 -
In my opinion if home to work journeys are not going to be regarded as allowable then how is he self employed? If he is SE then he has to have an office which isn't going to be where he provides his services as that's his customer's premises.
His 'work' is not his work it is his customer, he needs to travel to and from his customer's address. I think that if this is to be an ongoing thing then he will be pushing it if he works for the same person at the same place for more than 24 months.
If you are SE the £3 PW claim is not going to be argued by HMRC.
I think that it's not worth him being SE as there are not going to be huge tax benefits unless he was to claim all/descent amount of his rent expenditure where he is not actually staying and this is a complete no go. Plus I imagine he is renting these premises out, in that case needs to account for this income anyway.0 -
In my opinion if home to work journeys are not going to be regarded as allowable then how is he self employed? If he is SE then he has to have an office which isn't going to be where he provides his services as that's his customer's premises.
His 'work' is not his work it is his customer, he needs to travel to and from his customer's address. I think that if this is to be an ongoing thing then he will be pushing it if he works for the same person at the same place for more than 24 months.
If you are SE the £3 PW claim is not going to be argued by HMRC.
I think that it's not worth him being SE as there are not going to be huge tax benefits unless he was to claim all/descent amount of his rent expenditure where he is not actually staying and this is a complete no go. Plus I imagine he is renting these premises out, in that case needs to account for this income anyway.
Thanks for your help Steve, very generous of you.
Is his London rent therefore "acommodation" and his food "subsistence" (i.e. allowable) as he is away from his normal place of residence? I.e. at a client's on a business trip?
He has told me he rents a room and pays rent on the room even though noone is staying in said room.
I'll find out a lot more info tomorrow when I chat with him and take his books home.0 -
He should only claim 'use of home' for part of the expenses where he is residing and not a combination of both especially since he is not really SE where applying the SE vs employment tests.
Travel is another thing and would be hard to argue against. Perhaps a mileage claim at £0.45 per mile would be better than bring any MV's into the accounts.
To be honest it's hard to justify virtually all of his expenditure because he is not really SE in a practical sense so if you make the leap to treat him on this basis and do his tax return you should make claims (such as mileage, small amount of subsistence, acc'y. UOH etc) to reflect this.
Sounds like your client likes the idea of being SE and making all these claims (I know ppl who are at the pub and boast how their accountant puts his pints through but in reality he probably doesn't) so let him maybe think he is getting more benefit than he really is and just claim a reasonable amount of expenses on the safe side of the line.0 -
Did the £3 a week go up to £4 a week?
It did for employees / limited co directors:
http://www.hmrc.gov.uk/paye/exb/a-z/h/homeworking.htm
But can find no mention on self employed:
http://www.hmrc.gov.uk/incometax/relief-household.htm
Anyone?0 -
I was wondering about the £3/£4 as well Elaine. Just BUMPing.0
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Spoke to the security guard today and it seems as if he has been self-employed for the last two years, i.e. April 10 - Mar 11 and Apr 11 to Mar 12. However he never registered for self-employment during Apr 10 - Mar 11 and so never filed a tax return and never paid tax. He thinks his 'employer' registered him as self-employed during Apr 2011.
Prior to Apr 10 he believes that he was on payroll for 3 years but claims that he has never received a P60.
He works 5 days/week self-employed for his 'employer' and does absolutely no work from home.
He's arguing that he only has the 5 following business expenses:
1) Rent in London (i.e. accomodation)
2) Food (i.e. subsistence)
3) Motor expenses (90% of all motor costs is business)
4) Telephone (We haven't spoke about a telephone % yet)
5) Accountancy (that's me)
What I really don't understand is that he submits the number of hours he does to his 'employer' and then a second company that he has never heard of (not a payroll bureau) sends him a remittance advice with 20% of income tax deducted at source. I've only ever seen this type of thing with CIS. I can assure you that the remittance advice is not a payslip and that no E'ee NIC is being deducted. He has also assured me that he is paying Class 2 NICOs.
However since Mar 12 the mystery 2nd company has started to pay him gross.
I don't have a clue what is going on however I'm finding it all very fascinating.0 -
That's really weird. Security Guard doesn't fall under CIS.
The bottom line is that it is ultimately his responsibility to pay income tax on his income. He has two choices here:
1. Explain to HMRC that he is an employee, but that the employer insists he is self employed, and what should he do in terms of paying tax? This may be a bad call as they may say he has to complete the employment pages of the SA100, and show no tax deducted, meaning he will have to pay the tax with no allowable expenses. More likely is that they will tell him to complete the self employment pages and then they may or may not investigate the employer.
2. Declare himself self employed, claim expenses as if he was self employed, as ultimately this means he is discharging his responsibility in paying tax on his income, and it's the employer who could get into trouble for getting the employment status wrong.
To be honest, I'd go down the route of point two. I'd also get the "CIS" deduction statements and file that tax return as well - he might be due a refund.
A bit of a mess but you can only work with what you've got.
I'm pretty sure the rent isn't fully allowable though.0 -
Things dont stack up here. What is he doing with the original property? I assume this is now rented out, otherwise I cant see a security guard being able to afford rent on his original property and another property in London. I think the best option is to walk away very quickly from this one.0
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Things dont stack up here. What is he doing with the original property? I assume this is now rented out, otherwise I cant see a security guard being able to afford rent on his original property and another property in London. I think the best option is to walk away very quickly from this one.
Ha ha exactly what I was thinking. He doesn't seem to be telling everything (EG the no P60 thing). It's not worth you taking him on for the possible fees. Also what is his whole point if he says that he's never done a tax return? Must be to 'try' and claim expenses but like I said there is not alot that can be justified here.
'Walk away' by pointing him in some one else's direction
PS:It was £3 pw for 2011/12, Elaine you are right is is £4 from 2012-13 (for employees/directors) so imagine this will stand as a minimum for SE (at the least), thanks for that 0 -
Things dont stack up here. What is he doing with the original property? I assume this is now rented out, otherwise I cant see a security guard being able to afford rent on his original property and another property in London. I think the best option is to walk away very quickly from this one.
He claims that he is still paying rent to his landlord in the original property (he's still getting his books together but when he gives them to me I will look for these rent payments to the original landlord). I think the room is empty because he claims that he receives no rental income. He claims the reason why he is still paying rent is because if this security job or contract (I'm not sure which) ends he would have to move back because he wouldn't be able to afford to stay in London. And he says that he wants one fixed address and he's chosen that address to be the original property.
His gross income (before the second mystery company deducts tax at source) is very good because he works loads of hours/week so I reckon his taxable profit will be high enough to cover rent on the two rooms at the rent figures that he has quoted.
I agree with you, I may have to walk away from this one and just say that it is too complex.0 -
'Walk away' by pointing him in some one else's direction
Thanks for your advice, Stevo.
Funny thing is, he has a friend who is an ACCA accountant and he wants to give me photocopies of his books and give his friend the originals to do the tax return. Then he wants to see what we both, independently, come up with.
I think I'll just say "I think it's better if the tax return is done by your friend" and leave it at that.
This job is a complete mess and to be honest I don't think it's just his affairs that are confusing, the second mystery company deducting tax at source is also causing me a headache, and technically his 'customer' should put him on their payroll.0 -
That's really weird. Security Guard doesn't fall under CIS.
To be honest, I'd go down the route of point two. I'd also get the "CIS" deduction statements and file that tax return as well - he might be due a refund.
I'm pretty sure the rent isn't fully allowable though.
Hi Monsoon
As ever, thank you for your help.
****Stupid question alert****
When you say, "file that tax return as well", do you mean that:
1) In addition to the SA100 there is another tax return that needs to be filled out? What is it called, please?
2) The additional sheets of the SA100 need to be filled out?
3) Or the CIS box within the normal SA100 needs to be filled out?
By the way, you're famous! I read about your naked calender thing on AWeb.0 -
Funny thing is, he has a friend who is an ACCA accountant and he wants to give me photocopies of his books and give his friend the originals to do the tax return. Then he wants to see what we both, independently, come up with.
Is he going to pay both of you to do the same job? I doubt it - I wouldn't normally suggest this but I would drop this one like a hot brick0 -
Hi Monsoon
When you say, "file that tax return as well", do you mean
This: 2010-11:it seems as if he has been self-employed for the last two years, i.e. April 10 - Mar 11 and Apr 11 to Mar 12. However he never registered for self-employment during Apr 10 - Mar 11 and so never filed a tax return and never paid tax.
Cheers!By the way, you're famous! I read about your naked calender thing on AWeb.
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