Self employment?

Mr Burns

What consitutes self employment?

I ask the question in relation to the building trade. Can a foreman on a site be classed as self employed if he/she is not laying their own money on the line or is not paying for the job and has no control over his hours of work as per revenue guidelines?

I know of such a person who is in this position and is having 35% tax stopped at source without any PRSI paid. He doesnt consider himself any different from a normal worker who is on the books. Is this a mechanism to avoid employer PRSI?

What would the revenue make of this? Any views would be appreciated.

Mr. Burns

shoegirl

Yes, this is totally illegal and the Revenue Commissioners are aware of this scam and are heavily targeting the building trade to crack down on this. This is mostly unscrupulous subcontractors who try this scam.

However if 35% of tax is being stopped at source then he is probably paying some form of emergency tax. He needs to talk to both Revenue and his company and deal with this as soon as possible. If he has given his P45 to the company and they refuse to deal with it he should threaten to deal directly with the Revenue, who will be very quick to put things right.

vibe666

someone who is self employed would be someone who takes on contract positions rather than permanent ones. afaik.

i'm an it contractor and seek all my work through agencies or large companies who then pay my company for my services. i don't know if that's the technical definition or not, but i would say that anyone in a co0ntract position would count as self employed.

Victor

Originally posted by shoegirl
However if 35% of tax is being stopped at source then he is probably paying some form of emergency tax.

The 35% is relevant contracts tax. your friend should be getting a form C45 whenever he is being paid.

As to whether you friend is an employee or self-employed, him not being in any control of his working hours would suggest employment, not self employment. However there might be an exception to this in the case of a short contract, as you might have on a building site. It would be on a case by case basis, 3 weeks could be self employment, whereas 3 years would be employment. In between, would vary.

thegills

Some companies withold tax from 3rd party payments including contractors. State bodies withold 20%. At the end of each tax year your accountant talies up your tax bill, subtracts tax witheld and the contractor pays / gets the difference. The contractor should definitely get C45's from his client to prove that they are giving the 20% witheld to the Revenue.

Mr Burns

I went down with my friend to the revenue office yesterday. They seem concerned that my friend is on RCT@35% as they consider his work not to be self employment. They said that it would be refered to the senior inspector for a ruling.

What would the consequences if they rule that he should be on PAYE? Would the principal contractor get in the Sh*t over this?

Thanks

Monty

LoneGunM@n

If the Revenue Commissioner rule that your friend is in fact an employee, the payments that he has received already from the principal contractor will be treated as 'Net Wages' and thus will have to be Grossed Up and the resulting PAYE, PRSI & Levies paid to the Revenue Commissioners by the employer!!

i.e. they will have to provide for the PAYE, PRSI and Levies on his salary.

Here is a handy leaflet for your friend to have a look at http://www.revenue.ie/pdf/revdsw.pdf

LoneGunM@n

One thing to note though is, if he has already received RCTDCs [C45s] from the principal contractor and used the Relevant Contract Tax deducted on same RCTDCs against his tax or gotten a rebate, he will almost assuredly have to refund the 35% to the Principal Contractor.

Victor

Yes the contractor will only have to pay the tax once.