The implications of employing someone to help with the buy to let business

If you "employ" someone, then they are not "self employed". Be very careful here.

What you want to do is this: you take someone on who you consider is self employed, you give them work to do, they do it, you pay them gross and expect them to sort out their own tax.

Simple huh? No.

3 years later, they get a big tax bill cause they've been naughty and not declared their income and the tax man finds out. They don't want to pay 3 years of tax that they haven't saved for, so they say: "Oh, sorry Mr Taxman, but I'm an employee, my employer should have been paying you the tax." and they point the finger at you.

The taxman will look at their working relationship: '... you give them work to do, they do it, you pay them ...' and decide they're actually employees and give YOU the tax bill, plus more for employer's national insurance contributions, plus penalties, plus interest.

You're massively out of pocket and peeved off, so you terminate your worker's contract.

To make matters worse, your deemed employees now say: "Hey that's unfair dismissal" and take you to an employment tribunal, adding: "Oh and while you're at it, I've never been paid holiday pay, or sick pay, nor has my 'employer' paid into any pension etc etc".

It happens.

I'm not saying don't do this, but get proper legal advice. Possibly the best way to protect yourself from subsequent employment claims, is to make sure that your workers are employed by a limited company, and you pay the limited company. But obviously there's a cost here.

Oh and you don't need to worry about IR35, that's a worry for the worker, not you, and only applies if there's an intermediary, like the limited company route I just mentioned.

If you can't get them to work through a limited company, make sure that your working practices are such that they are not consistent with employment. However this is a tricky and often grey area, and ultimately it's almost impossible to be 100% sure ahead of time what someone's status is, only a court can determine that; it's crazy huh?!?

One silver bullet for self employment however, is that in order for someone to be an employee, there must be "personal service", i.e. they must have to perform the work personally. Your window cleaner or gardener is unlikely to be deemed to be your employee because they could be sick one day, and send their mate to clean your windows / mow your garden in their stead, and that would probably be fine.

So if your worker can phone in sick one day and send a mate instead, and you're ok with that, and ideally that actually happens occasionally, and you document it, that arrangement would almost certainly be incompatible with one of employment.

But like I said, get proper legal advice, if you don't want to worry about a potentially large and unexpected tax bill some years down the line.

Well what a massively informative post Colin. You've educated me about a lot of stuff I had no idea of. You've also opened a can of worms - yet another thing to worry about!
We could compile a book on this site entitled: 'One Thousand Things To Worry About As A Landlord!' And then all go off and jump off a cliff.
But seriously, I'll have to re-read what you wrote a few times and consider the implications in general for people whom we employ.
For example, what about we employ/our handyman works for us for a week here and there, a day here and there and he also works for lots of other people in the meantime? Surely not all these people can be deemed to be his employer at the same time...

Rosalind the handyman is not a problem. He does not work solely for one person and thus is not an employee. I have one person who does work for me but also actively seeks work from other landlords about once every three months so that his accountant can tell the revenue he works for other people as well as for me. Also remember that when you engage a contractor you are paying for the convenience of not employing that person with all it entails. The downside of that is you pay more. A typical contractor works on anything between £150 to £250 per day labour only. That's £20-£30 an hour. Whereas if you employ them on a limited or zero hours contract then it's more like £10 an hour or less. Like others I use a mix of employed and contractors across my businesses to give me profitability and flexibility.

Thanks Rosalind, sadly having a very good understand of employment vs self-employment status was necessary in a previous life, as several £tens of thousands of my own cash was at stake.

Yes it is possible for someone to be deemed an employee of different employers at the same time, and even be self employed too. E.g. You could work for the council as a day job (employee), and work in a bar in the evening (employee), and work as a cleaner at the weekend (self-employed).

It is true however, as Gary says, that having more than one "client" is a strong pointer towards self-employment, but it is a pointer only, and would be weighed up on balance with other factors. Factors that influence someone's employment status include (in a loose descending order of importance):

- Personal service / Right of Substitution (I covered this above in my first post)
- Mutuality of Obligations (if you offer work, do they have to accept or can they say no; and/or if they turn up for work, do you have to provide it?)
- Direction and Control (can you dictate to them exactly how to do their job?)
- Specific project based contract vs a general time based contract of service
- Exclusivity of service vs multiple clients (as Gary mentioned)
- Do they provide their own equipment (who provides their tools?)
- Integration into your business (do they get named uniforms, staff badges, or staff perks?)
- Financial risk (can they financially benefit / suffer based on business decisions they take?)
- Payment for mistakes (who pays if they do something wrong and have to fix it?)
- In Business on their own Account (do they have a website, business cards, liveried van and their own uniform?)
- And probably the least relevant (in HMRC's eyes): What was the intention of the parties at the time?

It's not a bad idea if taking someone on, on a self employed basis, to start a "Self Employment Evidence" file. Record in there: every time they quote for work (get a branded quote from them), every invoice they send, every time you turn them down for work or they can't turn up, every time they use a subcontractor or hopefully send a substitute, record general details of the arrangement (with reference to the above list), and ideally file a contract or Memorandum of Understanding between you, that details what's been agreed.

If you think this is overkill, I can get a landlord I know to call you who had 20 self-employed members of staff in a business for several years, that HMRC subsequently deemed were ALL deemed employees, and hit her for a massive tax bill + penalties and interest!