Employment status indicator

MarieNoelleMarieNoelle Trusted RegularHampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant, Array Posts: 1,336
Hi all

My client has used the services of a bookkeeper/ admin/ PA for a number of years. She works at my client's home for a couple of days, on client's computer, answers client's phone, uses her email to answer queries etc... apart from the bookkeeping the other tasks are dictated by my client.
She sometimes works from home.
As far as suppliers and customers are concerned she works for my client's business.
She has never sent someone else to do the job and even if she did they would definitely be vetted first by my client.
Up until 3 months ago she was invoicing under her and husband's partnership. I have pointed out to my client and the bookkeeper the risk of her being caught by IR35, but this isn't my client's problem so moved on.

She has now started invoicing as a sole trader. So now the responsibility is my client's. I used the tool from HMRC (trying to answer questions (from what I can see) and the engagement is deemed of employment. I have spoken to both my client and the bookkeeper and suggested they do the test themselves as they may have information I don't have, so the answer could be different.
They are dragging their feet on this despite me chasing. My client is happy to comply but the bookkeeper is adamant she is not an employee.
All I need is the completed ESI stating she is not and i can move on.

What would you do in my situation?

Thanks for any advice!

Comments

  • payrollpropayrollpro Trusted Regular Hampshire/SurreyRegistered, Working Together with HMRC Posts: 412
    Invoicing through a limited liability company always bring a problems with the deemed remuneration rules and in this case it is the recipient who runs the risk, not the payer. When you invoice as a sole trader the position changes where the payer faces the risks and not the recipient. I would get my client to suggest that her client the status is in doubt and if found to be wrong then her client faces the risk of having to account for PAYE and penalties. She might also consider the possibility that at some point she can claim employment rights on the grounds that the ESI tool indicates employment. It’s still a minefield for all parties but when the off payroll working rules extend from the public sector to all contracting we will see big changes to arrangements like this.
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,336
    edited November 2017
    Thank @payrollpro
    My client is aware of her responsibilities and tax consequences if she was found to be an employer.
    The problem lies more with the bookkeeper. I talked about her employment rights etc but she wants to remain a sole trader. My problem is that the bookkeeper isn't my client so not a lot I can do to persuade her to go through the test.
    Not sure how to move forward on this.
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,336

    If your client is happy to comply, why isn’t she doing the employment status indicator?

    She blames lack of time but I believe the other individual is trying to convince her it wouldn't be a good idea. She has spoken to her own accountant who says she isn't employed. To complicate matters she is a relative so she doesn't want to upset her!
    I also believe some questions on the ESI aren't that easy to understand. I could sit with my client and do it with her but don't want to influence her answers. At least if they do it together they will both agree on the answers.
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,336
    I realise there are no easy answers. I will nag again but if I don't get any response do I have a reporting obligation. Only problem is that at this stage my conclusions may be wrong. If I threaten to report so they do something about it would that be considered as tipping off?
    Feel a bit stuck right now.
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,336
    Of course. Your analysis is spot on. The client puts me in an awkward position because she doesn't want the confrontation as the other individual is family.
    Not going to let it ruin my Saturday though. Off to the pub now. Hopefully a glass or two of vino will help me work out a way forward.
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,013

    Hi all

    My client has used the services of a bookkeeper/ admin/ PA for a number of years. She works at my client's home for a couple of days, on client's computer, answers client's phone, uses her email to answer queries etc... apart from the bookkeeping the other tasks are dictated by my client.
    She sometimes works from home.
    As far as suppliers and customers are concerned she works for my client's business.
    She has never sent someone else to do the job and even if she did they would definitely be vetted first by my client.
    Up until 3 months ago she was invoicing under her and husband's partnership. I have pointed out to my client and the bookkeeper the risk of her being caught by IR35, but this isn't my client's problem so moved on.

    She has now started invoicing as a sole trader. So now the responsibility is my client's. I used the tool from HMRC (trying to answer questions (from what I can see) and the engagement is deemed of employment. I have spoken to both my client and the bookkeeper and suggested they do the test themselves as they may have information I don't have, so the answer could be different.
    They are dragging their feet on this despite me chasing. My client is happy to comply but the bookkeeper is adamant she is not an employee.
    All I need is the completed ESI stating she is not and i can move on.

    What would you do in my situation?

    Thanks for any advice!

    Just a few random thoughts:

    Is IR35 even applicable to partnerships? I thought it was just for limited companies where the worker holds more than 5% of the share capital?

    It is a well established fact that determining employment status is an incredibly difficult task.

    For obvious reasons you should not tip off.

    I don't think the ESI/ESS/CEST tool is a legal requirement so I don't think you should insist upon it.

    I once read a story on accountingweb about an accountant who didn't make an AML report when a former client submitted a fake mileage claim form (the accountant knew it was fake but the client was leaving their firm). The accountant was then fined as a result!
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,336
    Hi @reader and thanks for taking the time to answer.

    In answer to your question, yes partnerships are intermediaries too for IR35 purposes.
    As you say the tool isn't a requirement but once completed HMRC will accept the result (usual caveat that they have answered truthfully etc..).
    Client promised to have a look this month. Not holding my breath!
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