Employer National Insurance payments

[gwynwen]

I worked on and off for a local small business man for 3 years running a cafe for him. I was paid cash in hand every week, kept note of all my earnings and included them on my self-assessment tax return every year as an employed person( I also have some self-employment income ). I have been forced to sign on for a month in between jobs and have been told I can receive no job seekers allowance because I have not paid enough NI tax year 2010/2011. Where do I stand? The employer clearly paid no NI and I seem to be penalised for it. Have I done anything wrong? I feel very confused and angry that I am being denied a state benefit when I have been honest and a full taxpayer. Please advise me.

[EvianBaby]

Were the amounts for NI deducted from the cash amounts paid to you?

[gwynwen]

I don't know......I assumed (naively,stupidly) they were........if they weren't, who is liable? Many thanks.

[bednobs]

i don't understand this. You state you were paid "cash in hand" Well cash in hand means not paid "officially" (ie not subject to tax/ni and no payslips) so i don't understand why you expected to pay tax on it or that your employer would ahve paid NI

[bednobs]

nobody is "liable" - you have not paid enough NI to get benefits. End of.

[themas]

bednobs - the employer should be liable. He has defrauded HMRC by not deducting & paying over tax under PAYE, not deducting & paying NI Class 1 & not paying the employer's NI.

However, gwynwen appears to have known that no tax was being deducted & so paid it on the self-assessment return - where I suspect it may have been treated as self-employed income despite apparently being recorded as employment income. Of course, HMRC could also have some responsibility for not cross checking the self assessment details against the employer's records (or lack thereof).

gwynwen could (should?) report the employer to HMRC but in doing so may become liable to back payments of class 1 NI if it was deemed he/she was aware that no NI was being paid by the employer.

[bednobs]

ok, sorry that what i posted was wrong gwynwen. Whaen you say the employer is liable themas what do you actually mean by that? that the employer is now liable to pay for gwynwens's JSA? or that if she reports the employer, the employer will have to pay the back NI due and then GW will be able to get jsa?

[furrypusscat]

Did he/she tell you that you were to declare your earnings as a self employed person, if so then you should have been paying national insurance contributions and tax as a self employed person. You, as you say have probably been naive and not asked the relevant questions at the time.

[furrypusscat]

If as you say, it was cash in hand, you will not have received any wage slips showing deductions for NI or tax or a P60 at the end of the tax year so therefore I believe it was up to you to declare and make any payments necessary as a self employed person.

[venator]

On what basis did you work for this man?

If it was PAYE, you should have a contract of employment and payslips showing deductions for Tax and NI.

If it was casual, the businessman may have treated you as self employed, and paid you gross, cash in hand.

If it was PAYE, and you can prove it, then the employer is liable for the tax and NI which he failed to deduct or pay over, and he's probably in big trouble.

If it was casual, self employed, the Job Centre are correct.

Should be a simple matter of fact...

[gwynwen]

Well it would appear he treated me as self-employed judging by your answers.I would work full-time for a few months at a time and leave temporarily when my proper self employed work came up, when that finished I would return to work for him.......now, the inland revenue have all the information with regards to my earnings as I faithfully do my tax returns each year, do I need to contact them and tell them the whole story and will I now incur some massive fine for not paying NI contributions owed whilst working for this man? If I am liable for payment why didn't they inform me? It drives me nuts, I am so careful and frankly terrified of messing the tax man about and strive to be as honest as possible. I feel like an utter chump.
Many thanks for any polite and eloquent advice given.

[Nosha123]

If you were doing other self employed work then you should be paying your own nic contributions. It's not much. About £20 a month. That would have covered you then!

[furrypusscat]

You won't get fined but it will affect your state pension entitlement. You will probably be able to make up the downfall by making voluntary contributions which should help your state pension but doubt it will help in your jobseekers benefit. As you had been self employed, maybe the cafe owner assumed you would be dealing with your own tax/insurance yourself.

[boxtops]

I agree with the others, for cash in hand/casual pay, you'd be responsible for paying a self-employed NI stamp.

[Nosha123]

You can pay more to catch up with the arrears!

[furrypusscat]

I would suggest you make an appointment with someone at your local job centre explaining the misunderstanding and ask their advice.

[factor-fiction]

Clearly the employer should have paid Employers'NI, but I'm not sure we know whether he did or not.

We don't know is whether the employer deducted employees NI on your behalf from gross pay, Gwynwen, but as you knew tax wasn't being deducted it seems unlikely NI was being deducted. When you declared your earnings your tax liability would have been based on your gross pay that you declared so I can't see how it could be thought that NI had already been paid on your behalf. You could ask for a statement of how much NI, if any, was paid and ask them if you can pay the shortfall to help with future JSA claims and also with state pension entitlement.

If your income was low, of course, it may be that no NI was due from you. Were your earnings small- maybe under £100 a week?

[gwynwen]

Yes, my earnings were small but over £100 a week. I have contacted HMRC asking for a statement of what I owe and will endeavour to make top up payments. Thank you so much for your terribly clear and concise advice and for helping me to see that I haven't committed fraud!Everything seems much calmer now.

[furrypusscat]

Glad you are feeling happier about it. Best to deal with it now than let the situation occur again. They will realise it was an error. You haven't committed an offence as such, and will be given the opportunity to make up the shortfall. It's just unfortunate that it has now affected your benefit entitlement.

[themas]

bednobs - I meant the employer was liable for the tax/NI position.

gwynwen - If you are accepting now that you were self-employed for this job the position is that the class 2 NI contributions you were (I assume) making for your other self-employed work will cover you & you won't owe anything unless your total self-employed income was high enough for you to have to pay Class 4 NI contributions as well. HMRC should calculate this & let you know.

So far as JSA is concerned Class 2/4 contributions do not entitle you to contribution based JSA. I suspect this was not properly explained to you. You might have been entitled to means tested JSA & you should have been given information about that & allowed to claim, but entitlement does depend on total income, savings & some other circumstances.

[Skyline D]

There is pretty much no scenario whereby an "employer" would be deducting NIC and not tax. You must know whether he was deducting tax or not. What did you put on the tax return? Did you treat the monies received as gross and pay tax on them through the tax return process? If so you had to have known no NIC was deducted too.

You may not have earned enough for NIC to be paid anyway. If it was less than £136 in 2011/12 tax year (slightly lower for previous ones) none would be due. Even if some was occasionally due, it may not be enough to qualify you for JSA. They didn't say NI hadn't been paid, they said NOT ENOUGH NI had been paid. Were you paying it on your self employed income through the tax return or were earnings too low?

There aren't enough facts here to condemn the employer. To be honest in his position if I was using the labour of someone who is normally self employed for short periods of time "on and off" I'd treat him as self employed too and expect him to deal with his own tax. If he wasn't providing pay slips showing deductions of tax and NI (even if that deduction was NIL) then I can't imagine why you would assume anything differently.

This looks like a case of self employment to me and it's most likely the case you haven't paid sufficient NIC yourself to qualify for JSA. In which case presumably you either pay it up now or you accept you don't qualify and apply for whatever alternative benefits are available.