๐ ๐๐๐ฒ๐น๐ณ ๐ฎ๐ป๐ฑ ๐บ๐ ๐๐๐ฎ๐ณ๐ณ ๐ต๐ฎ๐๐ฒ ๐ฎ๐น๐น ๐ฑ๐ฒ๐ฐ๐ถ๐ฑ๐ฒ๐ฑ ๐๐ต๐ฎ๐ ๐๐ต๐ฒ๐ ๐๐ต๐ผ๐๐น๐ฑ ๐ด๐ผ ๐๐ฒ๐น๐ณ ๐ฒ๐บ๐ฝ๐น๐ผ๐๐ฒ๐ฑ.
I hear this every single day be it in conversation with clients, potential clients or on the facebook forums ๐คฏ
Most often the reason is because it works out better financially.. If this is the only reason that a salon owner is choosing to go self employed whilst treating the salon as one team and brand then this is aย
๐ฉ BIG RED FLAG
This working arrangement will often work out better because the salon owner/worker can keep back more profit in each business by not having to pay taxes via PAYE.
The arrangement can work if done so correctly and HMRC have some great tips on how to work out the status of the workers in your business here.
NHBF also have some really useful guidance here.
Note worthy tips below:
Salon owners and workers do not have the choice to determine their working status, this is set out by employment and tax law.
Employment status can be challenged in two instances:
1. Employment Law
2. Tax Law
Things may be working out nicely at the moment but as a salon owner if your self employed workers are actually employees in disguise you could open yourself up to claims.
If your working relationship determines ’employment status’ salon owners will need to honour this and worst case subject themselves to backdated claims for things such as holiday pay and sick pay as well as having to pay any outstanding PAYE and tax penalties for not having things set up correctly in the first place.
The self employed worker arrangement can look attractive until the above happens, so it is really important to get it right.
Not only is it risky in terms of opening yourself up to a claim from the worker for breaching employment rights but HMRC at any point can look into your business structure and decide whether tax and National Insurance should have been paid in respect of those workers, once they investigate they can look back into previous years and the business would need to correct the position and pay the outstanding taxes that are due. This is something that must be considered when setting up your salon as you will likely go bankrupt having to get up to date with all the missed payments and penalties for having the wrong structure.
Another thing to note is that HMRC do have the power to lift the veil of incorporation and hold Directors personally liable for company debts such as unpaid taxes as a result of having employees in disguise.
There is absolutely room for both types of working arrangement but please do ensure that you have the right structure and agreements in place to protect yourself and the business.
For more information on being a limited company check out this blog here.
If you need help in determining the correct structure for your business please do get in touch as we can help you just send us an email to [email protected] or BOOK A CALL TODAY.
We also have support from our associate HR Advisor Rebecca Day who can help you with regards to the employment law that you need to consider.ย
Friendly disclaimer: The information contained in this article is for guidance and information purposes only. It should not be relied upon as full and complete accounting, tax or legal advice. For specific advice relevant to your own situation please speak to Ria-Jaine MAAT or another professional direct.
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