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Self employed staff wages & expenses

  • 5 posts
  • # 113874

I have a new member of staff who is self employed. Each month he will send two separate invoices, one for the fees for his work and the second invoice for expenses. 

I have set him up as a supplier on Sage and processed his wages on this account with nominal code 7005 and tax code T9. Is this correct? He has not charged VAT, therefore assumed him as not VAT registered. 

For his expenses, can this also be processed through his supplier account or does this need to go somewhere else? What would be the correct nominal code and tax code in this situation?

Many thanks.

  • Member PM.Dip
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  • 397 posts
  • # 113875

Dominic

 

He is self employed so you do not post to wages.   You are paying him as a contractor therefore a supplier. He is not Vat exempt therefore you need to post T0.  

Regards

 

Liz

  • 5 posts
  • # 113877

Hi Lizzie,

Thanks for the info. Which nominal code should I use then? Also, what it be the same for expenses?

Thanks,

Dominic

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  • 39 posts
  • # 113880

Dominic said:

I have a new member of staff who is self employed. Each month he will send two separate invoices, one for the fees for his work and the second invoice for expenses. 

I have set him up as a supplier on Sage and processed his wages on this account with nominal code 7005 and tax code T9. Is this correct? He has not charged VAT, therefore assumed him as not VAT registered. 

For his expenses, can this also be processed through his supplier account or does this need to go somewhere else? What would be the correct nominal code and tax code in this situation?

Many thanks.


 Hi Dominic

HMRC has guidelines about when someone is self employed and responsible for their own tax and nic and when they are actually an employee and you deduct tax under PAYE as their employer.

Someone who is registered as self employed in general may be deemed to be an employee to you because of the nature of the way they carry out work for you.  It would be best for you to check on the HMRC online tool called the Employment Status Indicator (link below) and satisfy yourself whether they are an employee or a self employed contractor so you know whether to deduct tax or not and keep a copy of the result given in case it is queried in future.

We can then help you identify the correct postings.

 

https://www.gov.uk/government/collections/employed-or-self-employed

 

Best Wishes.

 

Janet Haines

  • 5 posts
  • # 113893

Hi Janet,

 

The staff are not my responsibility, I have just been asked to look after the books. I will pass it on, but in the mean time could you explain how I can process these invoices and expenses? I need to know which nominal code to post his invoice to for work done and his invoice for expenses.

 

Thanks,

 

Dominic

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  • 7 posts
  • # 113999

Dominic said:

Hi Janet,

 

The staff are not my responsibility, I have just been asked to look after the books. I will pass it on, but in the mean time could you explain how I can process these invoices and expenses? I need to know which nominal code to post his invoice to for work done and his invoice for expenses.

 

Thanks,

 

Dominic


Hi Dominic

As long as he's definitely a subcontractor rather than an employee (and the employer, i.e. who you work for, needs to make that assessment) then his invoice should be posted to the code that closely defines what it is that he's doing for the company, e.g. if he's a consultant - then concultancy or professional fees - one of the 7600 codes in Sage. If his work involves direct selling then I would more than likely process his invoice as a cost of sales as a freelancer, for example - although I'm not sure what the codes are now in Sage (haven't used it in a while) I'm sure there would be one in the 6000 codes though that would be suitable. If you're still not sure then come back to us with a description of what he does. This would be T0 VAT not T9.

His expenses would be split - so anything to do with subsistence, travel, accomodation, all have their own 7400 codes. Any training would go to the training account, etc. If you're still not sure then let us know what he's charged for. These expenses will also all be T0 VAT.

Many best wishes

Kim

Parks Bookkeeping Services

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  • 1073 posts
  • # 114002

Hi Dominic 

Welcome to the forum.  Are you the business owner or the bookkeeper ?.  The reason I ask is for two reasons 

1) Under the ICB motto, and as one of the forums moderators, we do not encourage unqualified bookkeepers to provide services to the clients.  It is clear that you do not seem to be aware of some of the basic rules of bookkeeping and payroll services- self-employed.  I would strongly recommend that you complete some qualifications whether with us or some bookkeeping body.   You may already be a student but under the code of conducts for the ICB bookkeepers who are not qualified or have the confidence or not allowed to provide bookkeeping services to clients 

2) About the question, I will pretend that I am HM Inspector here.  The fact that you referred to the person as a member of staff raises very loud questions.  So, I am going to say I would put 50:50 bet they are an actual employee even if they are part-time.

 If the individual is self-employed, he would include his expenses in his invoice and charge vat if he is vat register.   HMRC have announced that they are coming down heavily in the next lot of inspections on employers who deliberately treat someone as self-employed to get out of paying PAYE and NI and Auto-enrolment.   As a company, you are required by law to full fill this requirement.   One of the rules is they must supply their equipment, set their hours and can send another person to do the work.

A self-employed person does not get subsistence.  So there should never be any subsistence ever recorded for a self-employed individual if you do then they are an employee. 



Edited at 23 Oct 2016 01:33 PM GMT

  • 4 posts
  • # 114523

Do you have a contract in place? You really need a clause in there stating that this contractor is reponsible for paying their own tax, and indemnifying you against any claim for unpaid taxes that HMRC may have against you in the future.

That way you are both covered, and also it makes it clearer to HMRC that this individual is indeed a contractor and not an employee

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