It’s the start of another working week and my schedule will be taking me to Wales for the next two days for workshops for Sport Cardiff and for Disability Sport Wales.
We’ve been delivering workshops for Sport Cardiff for the last six months as part of their club support programme and today’s subject matter is the thorny area of self-employment – what it is and how to do it safely so that your self-employed workers don’t turn into employees, complete with a sizeable tax bill!
It’s a common misconception in sport that you can just decide to call someone self-employed, pay them their fee for work done and tell them that it is their responsibility to declare the money paid for tax and national insurance.
Sadly, the system doesn’t work like that – if you think about it, no-one would need to be employed if employers could just pay people and tell them they had to declare their own taxes. The employers would then not have to pay employer taxes and the tax authorities would have great difficulty chasing and checking everyone to ensure that they are paying their due.
In reality, only certain types of work and workers will qualify as self-employed in the eyes of the tax authorities and the responsibility for getting this right is legally with the person/organisation paying the money to the worker. The fines/penalties for getting this wrong can be significant – a recent case involving a trampolining club and its two supposed self-employed coaches resulted in a bill of over £40,000 for the club when the tax authorities deemed their coaches to be employed rather than self-employed.
Thankfully, it is relatively easy to check if your self-employed workers and they type of work they do for you would qualify as self-employment. The rules and regulations are available for inspection on the HMRC web site and you can clearly demonstrate that you are meeting the requirements through the use of a well-drafted contract between you and the worker.
It is important to note that we have come across some clubs who have a good contract with their workers but the actual way they work with the worker is different to what is stipulated in the contract. HMRC will very likely see through this and this could be viewed as a type of tax fraud, resulting in heavier penalties and even legal action.
If you need further assistance on this area, we cover this in detail on our BUSINESS ESSENTIALS workshop, in particular, what documentation is needed, how to put together a robust contract, etc.