Employed / Self Employed (wrongly posted in different category)

[humpy07]

My brother-in-law (22) has been working for his uncle in the paint spraying business since he was 17. This has always been on an 'informal', cash in hand basis. Since I have been involved in the family, I have constantly nagged my MIL and BIL to declare his income (£2000.00 pm) and start paying NI and Tax.

His uncle, is a bit of conman, and is trying to say that my BIL is self-employed and should be paying everything himself. This is only because he cannot afford to pay the employers NI contribution. There has been nothing in writing saying that he is self employed, and looking on HMRC there is no way that he would be classed as such. Each month he receives a cheque for the same amount, and paid from the same account.

Is there anything that he could do, bar grassing to the HMRC about the way his uncle is running the business, to try and get himself sorted and legal?

Thanks for your help

[factor-fiction]

Sounds very odd. If the business declared the salary yes they would pay NI at around 12% (not sure of the current precise figure) but they can offset the salary cost against tax.... unless of course the business owner doesn't pay tax etc himself
You are right- he can't be self-employed.

[hc4361]

If he is working for only one person, at the hours his boss decide, doing the jobs his boss asks, and has to ask for time off, he is not self employed.
The Inland Revenue is not that stupid.

[albalass]

Everyone is responsible for ensuring they pay the correct amount of tax regardless of whether they're employed or self employed. Claiming ignorance is not going to wash i'm afraid, everyone knows they need to pay tax. this extract is taken from the CWG2 book, page 17, which can be downloaded.

12 Deliberate deduction failures
In certain circumstances where we consider an
employee has received pay knowing that the
employer has deliberately failed to deduct tax from
the pay, a direction can be made for the employee
to pay the underpayment. Where we also believe
that an employee received pay knowing that the
primary contributions had not been deducted or
paid over, a decision can be made for the employee
to pay those contributions.

Primary contributions are BIL's NI.

However, it's also the uncle's legal responsibily as an employer to calculate and deduct tax and ni so if the decision is made that the negligance is on his part then he will be liable for some, perhaps all, of employer and employee contributions. It will really come down to HMRC to look at the case and decide who will foot the bill to be honest. The best thing for your BIL to do is phone the local employer compliance department and come clean, it may eventually work in his favour if he does.

[tamborine]

the employer is taking a huge risk as ultimately he is responsible for deducting NI & Tax from wages before payment to employee. The IR will re-coup their losses from the employer.

To use a SE person on a regular basis, the person must either give proof of SE, present a bill for their service or sign an 'in house' contract.

[buildersmate]

He should definitely inform HMRC.
As he is (incorrectly and unlawfully) being treated as a casual employee, he has not accrued any state pension rights for 5 years, not entitlement to contribution-based JSA in the event that he became unemployed.

[Skyline D]

Can't argue with any of the above. They are all right. Since borther in law clearly knows he isn't paying the correct tax and NI then he's guilty of tax evasion which is a potentially imprisonable offence though in reality he'd just get a penalty and have to pay any tax liability if and when he's caught.

He really should address the issue now. He will of course be droppng his uncle in it but that's his problem.

Potentially a way round it, presuming that the uncle does actually pay his own taxes and its a legal business, not a black market one, would be for uncle to make brother in law a partner, even if salaried and not profit sharing. That way there wouldn't be any employers NI and brother in law would deal with his own tax.