To Be or Not To Be …self-employed at the BBC? That is the expensive conundrum.
Want to be baffled? Start here:
What are the stakes?
FOR YOU - First, will the employer deduct tax (up to 50%) before paying you? Second, will the employer deduct your share of National Insurance, (v. complex but 5% to 10%) before paying you? Third, will the employer deduct a Pension Contribution (say, 4%) before paying you. There’s not much left is there.
FOR EMPLOYERS – First, they have to pay you monthly, but if you are self-employed they can delay. Second, they pay Employers’ National Insurance (v. complex but 5% to 10%). Third, they might pay into your pension – say, 4%. Fourth, they have a mass of red tape and frightening cash-flow problems – it’s no fun being a boss and running a wages book for the tax-collectors.
All in all, the tax collectors gain a lot from both Employers and Employees if Self-Employment is ruled out. BUT, the biggest cost to the Wanna-Be-Self-Employed is the loss of large expenses deductions in their service-companies, the loss of manoeuvres such as paying themselves a dividend instead of a salary and BIGGEST of all, the loss of the power (legally or not) to divert chunks of income to tax-havens – and pay no tax at all – and have money off-shore to invest or spend far from the madding crowd and piercing gaze of the Inland Revenue Service.
POSH PEOPLE ONLY SHOULD APPLY FOR REFUNDS – Service Companies conferring self-employment are mostly used by high-earners. Few of the plebs or hoi-polloi can organise them or persuade their employers to comply – particularly via tax-havens. Most high-earners take top advice on tax-plans and top tax-planners guarantee the outcomes of their schemes. If your plans are unravelling, work out the difference in costs and claim from your advisors – in turn they will claim from their Professional Indemnity Insurance policy.