Employed or Self-Employed... that is the question
Thread Starter
Join Date: Mar 2002
Location: east midlands
Posts: 55
Likes: 0
Received 0 Likes
on
0 Posts
Employed or Self-Employed... that is the question
People,
A long winded question which I will try and compress... what defines an employed instructor from a self-employed instructor?
I ask this because the Inland Revenue do not seem to give clear guidance about this area. I have recently enquired about an instructor job and was told that I would be self-employed. However, the Revenue state that I can't be self-employed as I am technically employed by the FTO. (they are my only method of income)
Can anybody please shed some more light on the matter.
Ta
A long winded question which I will try and compress... what defines an employed instructor from a self-employed instructor?
I ask this because the Inland Revenue do not seem to give clear guidance about this area. I have recently enquired about an instructor job and was told that I would be self-employed. However, the Revenue state that I can't be self-employed as I am technically employed by the FTO. (they are my only method of income)
Can anybody please shed some more light on the matter.
Ta
Join Date: Jul 2004
Location: UK
Posts: 849
Likes: 0
Received 0 Likes
on
0 Posts
Lots of companies try to pull this one as a way of avoiding having to pay NI contributions on your behalf, and complying with UK employment law.
The IR will take the view that you are employed if your work is largely dictated by the FTO (ie, you work when they say, on their pay rates, with their equipment), and particularly so if this is your only source of income.
The IR will take the view that you are employed if your work is largely dictated by the FTO (ie, you work when they say, on their pay rates, with their equipment), and particularly so if this is your only source of income.
Join Date: Nov 2000
Location: Cambridge, England, EU
Posts: 3,443
Likes: 0
Received 1 Like
on
1 Post
Employment status law is immensely complicated.
The chances are that everything that all potential "employers" will tell you is wrong, and the changes are pretty good that everything the Inland Revenue will tell you is wrong.
The only for-sure way to find out whether an engagement counts as employment or not is to take it through the courts after the event. (Unless it's particularly bang-to-rights fair-cop one way or the other, but yer average punter won't even know that without paying for professional advice.) This is partly why the Inland Revenue won't say for sure in advance - to be honest they don't have a clue either.
As an example of the IR's record of getting these decisions right look at contested IR35 cases: the IR lose a hundred or three for each one they win. So when they tell you "this definitely counts as employment" it's seriously possible that they might be talking complete bollocks.
This is, to put it mildly, an unsatisfactory situation. There are people lobbying for changes to the law to clarify this stuff, basically looking for a "right to be self employed", so that if the worker (under no coercion) and the client both want to regard the relationship as not being employment then they will actually be allowed to. This is, however, oink oink flap flap territory with the present government.
In particular, re:
It doesn't matter a sausage what view the IR take. What matters is the law, as defined by the view the courts take. The IR lose more than they win, so don't believe any view they give you without at least taking further professional advice.
And in this context "professional advice" does not mean your everyday high street accountant or solicitor: they quite often don't have a clue either, not being experts in this particular field - "professional advice" means an employment status expert.
The chances are that everything that all potential "employers" will tell you is wrong, and the changes are pretty good that everything the Inland Revenue will tell you is wrong.
The only for-sure way to find out whether an engagement counts as employment or not is to take it through the courts after the event. (Unless it's particularly bang-to-rights fair-cop one way or the other, but yer average punter won't even know that without paying for professional advice.) This is partly why the Inland Revenue won't say for sure in advance - to be honest they don't have a clue either.
As an example of the IR's record of getting these decisions right look at contested IR35 cases: the IR lose a hundred or three for each one they win. So when they tell you "this definitely counts as employment" it's seriously possible that they might be talking complete bollocks.
This is, to put it mildly, an unsatisfactory situation. There are people lobbying for changes to the law to clarify this stuff, basically looking for a "right to be self employed", so that if the worker (under no coercion) and the client both want to regard the relationship as not being employment then they will actually be allowed to. This is, however, oink oink flap flap territory with the present government.
In particular, re:
The IR will take the view that
And in this context "professional advice" does not mean your everyday high street accountant or solicitor: they quite often don't have a clue either, not being experts in this particular field - "professional advice" means an employment status expert.
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
To be honest for instructors pay it doesn't actually pay for you to be classed as self employed.
It used to work out at something like 29k as a IT consulatant to be worth the hassel. Basically once your on 40% tax it is worth it.
The employeers will say you get to claim x y Z back.
Medical: its reqired to do your job its thier problem they should pay for it.
License: if you go over 3 years again its not a valid reason for them to get shot of you its their problem. Its thier cost not yours.
By being self employed they are trying to get round employemnt law on minimum wages and also you ability to go to tribunal if they sack you because they feel like it.
If you work day in day out in the same place. There won't be a problem you will be under IR35 as an employee.
Basically if anyone refuses to take you on because you don't want to be self emploryed i would shop the buggers to the IR. Its going to cost them heaps in accountancy fees and bull**** factor to get the IR to leave them alone.
The advantages more than outway the advantages to an instructor getting payed under 12k a year
It used to work out at something like 29k as a IT consulatant to be worth the hassel. Basically once your on 40% tax it is worth it.
The employeers will say you get to claim x y Z back.
Medical: its reqired to do your job its thier problem they should pay for it.
License: if you go over 3 years again its not a valid reason for them to get shot of you its their problem. Its thier cost not yours.
By being self employed they are trying to get round employemnt law on minimum wages and also you ability to go to tribunal if they sack you because they feel like it.
If you work day in day out in the same place. There won't be a problem you will be under IR35 as an employee.
Basically if anyone refuses to take you on because you don't want to be self emploryed i would shop the buggers to the IR. Its going to cost them heaps in accountancy fees and bull**** factor to get the IR to leave them alone.
The advantages more than outway the advantages to an instructor getting payed under 12k a year
If you're looking for full-time employement, then yes, you should indeed be an employee. As should be the norm at a commercial FTO.
But if you only want to do a bit of PPL-level instructing now and again at Club level and you've got a 'real' job elsewhere, then it'll be simpler for all concerned if you're self-employed. Just declare your additional income on your income tax declaration and don't forget to offset legitimate expenses against tax....
When Club instructors were predominantly part-time PPL/FIs or R/BCPL/FIs who were happy to do a day or two's instructing now and again, there was rarely a problem; it suited everybody. But now that there are so many hours-building airline co-pilot wannabes around who think that the world owes them a living, there's all this carping about 'minimum salaries', 'the school should pay for my medical, revals, BUPA' etc., there seems to be a perceived problem.
If you want to receive a salary of about £30K as a full-time PPL instructor, then first find me some customers who will pay £200 per hour to fly a 30 year old Cessna 152. Until then, accept that UK PPL training can never afford to pay what I would call a half-decent salary. At least, not while it's still so easy to learn to fly at vastly lower expense in the USA.
Hopefully we'll see the return of part-time PPL/FIs (who may be paid for instructing) before too long - and the airlines will have to go back to proper training schemes for their co-pilots.
But if you only want to do a bit of PPL-level instructing now and again at Club level and you've got a 'real' job elsewhere, then it'll be simpler for all concerned if you're self-employed. Just declare your additional income on your income tax declaration and don't forget to offset legitimate expenses against tax....
When Club instructors were predominantly part-time PPL/FIs or R/BCPL/FIs who were happy to do a day or two's instructing now and again, there was rarely a problem; it suited everybody. But now that there are so many hours-building airline co-pilot wannabes around who think that the world owes them a living, there's all this carping about 'minimum salaries', 'the school should pay for my medical, revals, BUPA' etc., there seems to be a perceived problem.
If you want to receive a salary of about £30K as a full-time PPL instructor, then first find me some customers who will pay £200 per hour to fly a 30 year old Cessna 152. Until then, accept that UK PPL training can never afford to pay what I would call a half-decent salary. At least, not while it's still so easy to learn to fly at vastly lower expense in the USA.
Hopefully we'll see the return of part-time PPL/FIs (who may be paid for instructing) before too long - and the airlines will have to go back to proper training schemes for their co-pilots.
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
HM Revenue and Customs (as they are now called) use six basis tests in considering the employment status of an individual. These are true for all professions; not just aviation.
1. The nature of the contract - is it a contract for services or a contract of service.
2. Is "your customer" your only customer or do you have several. HMR&C will make allowances if you are starting up and haven't yet found a client base.
3. Do you have the right in your contract to send someone else as a replacement if you can't make it.
4. Do you use your own tools and equipment.
5. Do you partake in the risks and rewards of the business.
6. Do you choose when you work and how? Or does your "customer/employer" tell you how the job should be done?
The "self-employed" can save on tax in that their expenses are allowable as tax deductions i.e. getting to and from work. However, that person should be bearing all their such as medicals. The "customer" will save 12.8% on Employer's National Insurance as well. So, the HMR&C will always try to err towards employee status.
Hope that helps.
Cheers
Whirls
Thanks for the vote of confidence Gertrude!!!
1. The nature of the contract - is it a contract for services or a contract of service.
2. Is "your customer" your only customer or do you have several. HMR&C will make allowances if you are starting up and haven't yet found a client base.
3. Do you have the right in your contract to send someone else as a replacement if you can't make it.
4. Do you use your own tools and equipment.
5. Do you partake in the risks and rewards of the business.
6. Do you choose when you work and how? Or does your "customer/employer" tell you how the job should be done?
The "self-employed" can save on tax in that their expenses are allowable as tax deductions i.e. getting to and from work. However, that person should be bearing all their such as medicals. The "customer" will save 12.8% on Employer's National Insurance as well. So, the HMR&C will always try to err towards employee status.
Hope that helps.
Cheers
Whirls
Thanks for the vote of confidence Gertrude!!!
Join Date: Nov 2000
Location: Cambridge, England, EU
Posts: 3,443
Likes: 0
Received 1 Like
on
1 Post
Thanks for the vote of confidence Gertrude!!!
Of course there will be exceptions, but what I report is the overall view of the umpteen thousand members of the PCG who have spent an immense amount of energy (and time and money) on employment status issues over the last few years.
(Actually looking at your profile it occurs to me that you might be a tax inspector. In which case I'm sure you'll be one of the ones who only takes on cases with a decent chance of success, not one of those who waste years of punters' lives on pointless investigations that you were bound to lose in the end anyway.)
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
Gertrude,
...er... I'm a Chartered Accountant. I am currently working as a contractor (so understand the issues involved) in an area involving fraud investigation (hence the profile) but I am not a tax inspector
So it's OK - you can still talk to me socially and you'll be pleased to know that my body is not composed of 85% spit!!
I would have thought in the case of flying instructors - if the instructor is freelance, can he find and bring his own students to the school or does the school find the students. Does the school around the flying times with the student or will the student do that directly with the instructor. Does the school make the profit or can the instructor pay a flat rate to the school for the hire of the aircraft. These are a couple of other scenarios which HMR&C may consider.
Cheers
Whirls
...er... I'm a Chartered Accountant. I am currently working as a contractor (so understand the issues involved) in an area involving fraud investigation (hence the profile) but I am not a tax inspector
So it's OK - you can still talk to me socially and you'll be pleased to know that my body is not composed of 85% spit!!
I would have thought in the case of flying instructors - if the instructor is freelance, can he find and bring his own students to the school or does the school find the students. Does the school around the flying times with the student or will the student do that directly with the instructor. Does the school make the profit or can the instructor pay a flat rate to the school for the hire of the aircraft. These are a couple of other scenarios which HMR&C may consider.
Cheers
Whirls
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
*can they find and bring his own students to the school.
Yes they can. Normally the method of gaining students is for them to pruchase a trial flight from the flying school or club and then with sparkeling wit and charm sell them on the idea that they want a PPL.
*Does the school around the flying times with the student or will the student do that directly with the instructor.
The school will be the point of contact with all money transactions going through the books. They will allocate the plane and who is going to instruct that person.
*Does the school make the profit
Well most schools would like to make a profit. Clubs tend not to because of there setup.
*can the instructor pay a flat rate to the school for the hire of the aircraft.
Nope Though i have seen that the student pays for the plane and then pays the instructor seperatly. Schools don't like this though and its only usually done at none profit making clubs who cover the costs of CAA approval through membership fees etc.
also as well each instructor at a school is meant to be registred with the CAA working at that school. So if an instructor dosn't have any other form of income. They are only on 1 schools books....
And the other methods
1. you supply your labour as a service
2. You only have one customer thats the flying school you are registered with. They have several customers.
3. Nope in fact by the rules of the operation you can't get another instructor in adhoc if you want to do something else.
4. Nope definatly not
5. No you get a fixed fee per hour worked.
6. Nope you get told when to turn up and when your finished and you get told what your dutys are when you turn up.
What do you recon then Whirlygig?
And i also used to be a contractor but disappeared off abroad before IR35 hit, mainly because of IR35.
Yes they can. Normally the method of gaining students is for them to pruchase a trial flight from the flying school or club and then with sparkeling wit and charm sell them on the idea that they want a PPL.
*Does the school around the flying times with the student or will the student do that directly with the instructor.
The school will be the point of contact with all money transactions going through the books. They will allocate the plane and who is going to instruct that person.
*Does the school make the profit
Well most schools would like to make a profit. Clubs tend not to because of there setup.
*can the instructor pay a flat rate to the school for the hire of the aircraft.
Nope Though i have seen that the student pays for the plane and then pays the instructor seperatly. Schools don't like this though and its only usually done at none profit making clubs who cover the costs of CAA approval through membership fees etc.
also as well each instructor at a school is meant to be registred with the CAA working at that school. So if an instructor dosn't have any other form of income. They are only on 1 schools books....
And the other methods
1. you supply your labour as a service
2. You only have one customer thats the flying school you are registered with. They have several customers.
3. Nope in fact by the rules of the operation you can't get another instructor in adhoc if you want to do something else.
4. Nope definatly not
5. No you get a fixed fee per hour worked.
6. Nope you get told when to turn up and when your finished and you get told what your dutys are when you turn up.
What do you recon then Whirlygig?
And i also used to be a contractor but disappeared off abroad before IR35 hit, mainly because of IR35.
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
As you don't know my real name and hence my ICAEW membership number, I shouldn't be struck off for giving erroneous advice!!
I would reckon that the Revenue would have a very good case to say that that example constitutes employee status. The school would be in deeper do-do than the instructor!
I would like to hear the school's argument for self-employed (other than employer's NIC avoidance!)
Cheers
Whirls
I would reckon that the Revenue would have a very good case to say that that example constitutes employee status. The school would be in deeper do-do than the instructor!
I would like to hear the school's argument for self-employed (other than employer's NIC avoidance!)
Cheers
Whirls
Join Date: Nov 2003
Location: notts
Posts: 636
Likes: 0
Received 0 Likes
on
0 Posts
Self employed?
How instructors are contracted is very very different one from another.
A CFI working full time and receiving a wage or salary and also an instructor in a similar circumstance is obviously employed. However many are not; working ad hoc and being paid ad hoc.
I do not pay part time Instructors a retainer but do pay travelling/turn up out of pocket expenses when appropiate. They are paid by the 'hour flown' or part thereof. Weather will in the most part determin how many hours if any that are flown each day. The Instructor alone determines the appropiate lesson for the student and the content to be flown that day and also whether the met conditions will allow the lesson aim to be achieved - in that sense and in others they retain a professional independance. I would of course expect all Instructors to work in consultation with me in providing continuity and policy.
Taxing and NIC would be a nightmare in the circumstances for ourselves and the Revenue because pay and benefits would be unpredictable and difficult to manage and audit. Which is why, I believe, the Revenue continue to accept the 'self employed' status, in the main, of part time Instructors.
A CFI working full time and receiving a wage or salary and also an instructor in a similar circumstance is obviously employed. However many are not; working ad hoc and being paid ad hoc.
I do not pay part time Instructors a retainer but do pay travelling/turn up out of pocket expenses when appropiate. They are paid by the 'hour flown' or part thereof. Weather will in the most part determin how many hours if any that are flown each day. The Instructor alone determines the appropiate lesson for the student and the content to be flown that day and also whether the met conditions will allow the lesson aim to be achieved - in that sense and in others they retain a professional independance. I would of course expect all Instructors to work in consultation with me in providing continuity and policy.
Taxing and NIC would be a nightmare in the circumstances for ourselves and the Revenue because pay and benefits would be unpredictable and difficult to manage and audit. Which is why, I believe, the Revenue continue to accept the 'self employed' status, in the main, of part time Instructors.
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
If the "part-time" instructors have no other source of employment income, then I'm surprised that the Revenue are accepting it. Probably more like, haven't got round to reviewing it!!! The Revenue are in a bit of a mess at the moment and many circumstances are going unnoticed rather then being investigated.
The circumstance which you describe does not indicate to me self-employed; the fact that you find PAYE difficult to administer is not a valid argument; Employer's NIC is 12.8% of gross pay (as near as dammit) so that should help in your cash flow management. Pay would be just as easy to predict as paying your instructors on their invoice. Benefits? You give them? Audit is straightforward; you keep records! None of this is unpredictable. Honest. There is no reason why you can't run ad-hoc PAYE. There is nothing difficult, different or complicated about the financial aspects of an aviation business (apart from the fact that it's a good way to make a small fortune!!) and these circumstances apply to many different professions. This situation is not unique.
Professional independence as you describe is NOT one of the factors which the Revenue would take into account. As an ACA, I am governed by rules of my Institute which override what my employer tells me to do. Similarly, with the commercial pilot's licence I would imagine.
This is just my humble opinion and all I suggest is that those of you in that murky grey area, be careful. You could get done!!
The circumstance which you describe does not indicate to me self-employed; the fact that you find PAYE difficult to administer is not a valid argument; Employer's NIC is 12.8% of gross pay (as near as dammit) so that should help in your cash flow management. Pay would be just as easy to predict as paying your instructors on their invoice. Benefits? You give them? Audit is straightforward; you keep records! None of this is unpredictable. Honest. There is no reason why you can't run ad-hoc PAYE. There is nothing difficult, different or complicated about the financial aspects of an aviation business (apart from the fact that it's a good way to make a small fortune!!) and these circumstances apply to many different professions. This situation is not unique.
Professional independence as you describe is NOT one of the factors which the Revenue would take into account. As an ACA, I am governed by rules of my Institute which override what my employer tells me to do. Similarly, with the commercial pilot's licence I would imagine.
This is just my humble opinion and all I suggest is that those of you in that murky grey area, be careful. You could get done!!
Join Date: Jan 2001
Location: UK
Posts: 164
Likes: 0
Received 0 Likes
on
0 Posts
Been there, done that....
Couple of years back, the views of both myself, (as RTF), and those of the instructors, were that they (instructors), wished to be treated as self employed.
The revenue, however, had different ideas, based on the points already raised.
This was a battle that took me 10 months to win, (yes, I won, not the revenue), and our staff are now <very legally> self employed.
All it took was the correct interpretation of the points of employment / self-employment, but this was spun out over a much longer period than anticipated.
ariel
ps. quote:
----------------------------------------------------------------------------
There is nothing difficult, different or complicated about the financial aspects of an aviation business (apart from the fact that it's a good way to make a small fortune!!)
-----------------------------------------------------------------------------
Whirlygig - From reading some of your contributions, you are obviously an intelligent and articulated person, whose contribution to this board goes without saying, but on the above quote, I can only reply
TRY IT FOR YOURSELF, AND SEE... especially the bit about the fortune!!
Couple of years back, the views of both myself, (as RTF), and those of the instructors, were that they (instructors), wished to be treated as self employed.
The revenue, however, had different ideas, based on the points already raised.
This was a battle that took me 10 months to win, (yes, I won, not the revenue), and our staff are now <very legally> self employed.
All it took was the correct interpretation of the points of employment / self-employment, but this was spun out over a much longer period than anticipated.
ariel
ps. quote:
----------------------------------------------------------------------------
There is nothing difficult, different or complicated about the financial aspects of an aviation business (apart from the fact that it's a good way to make a small fortune!!)
-----------------------------------------------------------------------------
Whirlygig - From reading some of your contributions, you are obviously an intelligent and articulated person, whose contribution to this board goes without saying, but on the above quote, I can only reply
TRY IT FOR YOURSELF, AND SEE... especially the bit about the fortune!!
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
nah it doesn't.
You phone the IR up and 2 days later a pack comes through the post.
For each person you submit 1 form to the IR the forms are provided and it takes about 1 min for the person to fill out.
You then start using the emergency tax code.
You then decide if you are doing it weekly or monthly. (would do monthly).
Total up what each person has earn't. Stick it in the column.
Then look up the first booklet and read across and you have taxable income stick it in the col for that. Next use the table in the monthly section and it will give you the tax. Then do the same using the NI booklet. It will give you employees and employers. Again stick into the col provided.
Then write cheque to employee for pay plus none taxable expenses and a cheque to the IR for NI and TAX.
Within about 2 weeks the IR will send you a tax code for the employees. Just start using that tax code instead of the emergency it all works its self out.
Takes about 10 mins per person every time you pay them. And that dosn't matter if you pay them 10 pounds one month and 3000 the next. Then at the end of every tax year you copy the last line in the working sheet onto a P60 and give it to the employee.
The working sheet that you use to fill out from the booklets is your audit trail. Or you can make a spread sheet up and use that instead to check the maths and then transfer onto sheets.
If the employee wants to go for a medical and you have agreed with them that they are paying you pay for the medical and deduct it off the amount to be paid before tax. If they want to go on a course and your vat registred you deduct the amount before VAT off the pay. Thus the person dosn't pay VAT and NI and tax and you don't pay the employers NI. And if you really feel nice you can factor in the amount you will gain off the employers NI contribution.
There really isn't any excuse if trades men can do it. A highly trained commercial pilot should have no problems getting to grips with it.
MJ
You phone the IR up and 2 days later a pack comes through the post.
For each person you submit 1 form to the IR the forms are provided and it takes about 1 min for the person to fill out.
You then start using the emergency tax code.
You then decide if you are doing it weekly or monthly. (would do monthly).
Total up what each person has earn't. Stick it in the column.
Then look up the first booklet and read across and you have taxable income stick it in the col for that. Next use the table in the monthly section and it will give you the tax. Then do the same using the NI booklet. It will give you employees and employers. Again stick into the col provided.
Then write cheque to employee for pay plus none taxable expenses and a cheque to the IR for NI and TAX.
Within about 2 weeks the IR will send you a tax code for the employees. Just start using that tax code instead of the emergency it all works its self out.
Takes about 10 mins per person every time you pay them. And that dosn't matter if you pay them 10 pounds one month and 3000 the next. Then at the end of every tax year you copy the last line in the working sheet onto a P60 and give it to the employee.
The working sheet that you use to fill out from the booklets is your audit trail. Or you can make a spread sheet up and use that instead to check the maths and then transfer onto sheets.
If the employee wants to go for a medical and you have agreed with them that they are paying you pay for the medical and deduct it off the amount to be paid before tax. If they want to go on a course and your vat registred you deduct the amount before VAT off the pay. Thus the person dosn't pay VAT and NI and tax and you don't pay the employers NI. And if you really feel nice you can factor in the amount you will gain off the employers NI contribution.
There really isn't any excuse if trades men can do it. A highly trained commercial pilot should have no problems getting to grips with it.
MJ
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
ariel,
I thought it was one of the oldest aviation jokes.
How do you make a small fortune out of aviation? Start with a large one.
Sorry - didn't think I'd have to explain that one!! There is still nothing that's any more difficult in running an aviation business to any other. There is nothing complex in it. Tough business wise and commercially maybe but financially, it should all be straight forward.
Cheers
Whirls
Thank you for the compliment but I'm not articulated - just have double-jointed elbows!! 
PS - mad jock - a MANUAL payroll !!!! I haven't seen that run for nigh on 20 years!!! Big blue P11 forms? Makes me feel all warm and nostalgic.
I know I shouldn't but I can recommend a computer payroll package which is synomous with "a wise man" and "a green colour"
I thought it was one of the oldest aviation jokes.
How do you make a small fortune out of aviation? Start with a large one.
Sorry - didn't think I'd have to explain that one!! There is still nothing that's any more difficult in running an aviation business to any other. There is nothing complex in it. Tough business wise and commercially maybe but financially, it should all be straight forward.
Cheers
Whirls
Thank you for the compliment but I'm not articulated - just have double-jointed elbows!!
PS - mad jock - a MANUAL payroll !!!! I haven't seen that run for nigh on 20 years!!! Big blue P11 forms? Makes me feel all warm and nostalgic.
I know I shouldn't but I can recommend a computer payroll package which is synomous with "a wise man" and "a green colour"
Join Date: Jan 2001
Location: UK
Posts: 164
Likes: 0
Received 0 Likes
on
0 Posts
Whirlygig
I don't have the details to hand, (the correspondence between ourselves, the accountant, and the revenue was vast, and is stored in a file, which I don't have here). The correspondence also included a test case, (the revenue against another employer - the employer retained the right for self-employment in that test case).
However, from memory, here are some of the points, (in no particular order), of the issues debated with the revenue:
Owning tools and equipment.
That for us, was the 'tricky' one We obviously own the aircraft, but the instructor owns all other items of equipment, (headsets, notes, equipment, etc..)
Do the instructors take risks with the business?
An emphatic NO. They are not deemed to be 'part and parcel' of our business.
Do instructors choose when and how to work.
On the question of 'when' - sometimes they do, somethimes they don't. If they don't want to work, we'll find somebody else. On the question of how - we do NOT tell them how to do their job - they are highly trained professionals, and how to instruct is left up to them.
If instructors cannot carry out work which they SPECIFICALLY stated they could, the onasis is on them to try to find a replacement. If they can't , we will try to. If we can't get somebody at short notice, then it is the instructors responsibility to cancel and rearrange the students who will be let down.
There are other points, but I'm not prepared to go into them on a public bulletin board.
One thing I will say though, is that should we have 'lost' the issue of self-employment, we had a 'get out' clause: The nature of the business would have been restructured - students would have paid us for the aircraft, and the instructor for their services. Also, we would have hired out the aircraft to the instructor. (They would then have paid us for that, and then charged the student whatever rate they wished).
On our accountants advice, no court in the land would then deem our instructors as being employed.
As previously stated, it took a lot of battling for the revenue to back down, but in a way, I'm glad it happened when it did, because we are now well and truely 'above board', with nothing to hide, and no retribution to fear.
ariel
Edited to say
Whirlygig. Sorry about the quote. You are of course correct about the old aviation joke of 'put 3 million in to make 1 million' I'm spending too much time at this airport!!
I don't have the details to hand, (the correspondence between ourselves, the accountant, and the revenue was vast, and is stored in a file, which I don't have here). The correspondence also included a test case, (the revenue against another employer - the employer retained the right for self-employment in that test case).
However, from memory, here are some of the points, (in no particular order), of the issues debated with the revenue:
Owning tools and equipment.
That for us, was the 'tricky' one We obviously own the aircraft, but the instructor owns all other items of equipment, (headsets, notes, equipment, etc..)
Do the instructors take risks with the business?
An emphatic NO. They are not deemed to be 'part and parcel' of our business.
Do instructors choose when and how to work.
On the question of 'when' - sometimes they do, somethimes they don't. If they don't want to work, we'll find somebody else. On the question of how - we do NOT tell them how to do their job - they are highly trained professionals, and how to instruct is left up to them.
If instructors cannot carry out work which they SPECIFICALLY stated they could, the onasis is on them to try to find a replacement. If they can't , we will try to. If we can't get somebody at short notice, then it is the instructors responsibility to cancel and rearrange the students who will be let down.
There are other points, but I'm not prepared to go into them on a public bulletin board.
One thing I will say though, is that should we have 'lost' the issue of self-employment, we had a 'get out' clause: The nature of the business would have been restructured - students would have paid us for the aircraft, and the instructor for their services. Also, we would have hired out the aircraft to the instructor. (They would then have paid us for that, and then charged the student whatever rate they wished).
On our accountants advice, no court in the land would then deem our instructors as being employed.
As previously stated, it took a lot of battling for the revenue to back down, but in a way, I'm glad it happened when it did, because we are now well and truely 'above board', with nothing to hide, and no retribution to fear.
ariel
Edited to say
Whirlygig. Sorry about the quote. You are of course correct about the old aviation joke of 'put 3 million in to make 1 million' I'm spending too much time at this airport!!
Last edited by ariel; 10th Oct 2005 at 16:06.
Join Date: May 2001
Posts: 10,815
Likes: 0
Received 0 Likes
on
0 Posts
yes it does make life simpler. But you know what flying schools are like with computers.
I just made a spread sheet up and you stuck in the amount that was taxable pay and it spat all the numbers out. Cheques were then written. And the columns all tallyed with the big sheet.
I can see the percieved advantage to the instructor if its a part time second job. But with some creative managment you can offset alot that you wouldn't normally dream of getting through as expenses. Usually getting the VAT back as well the tax.
Now the horrible little grunts of hour building FI's. Its a nightmare for them. They will incure breaks in their NI contributions resulting in years of stupid letters wanting them to pay extra into the state. If they are ill its a swine getting sick benefit. All the other benifits are a pain virtually impossible to get low income benifits like housing support etc. Your services can be terminated at a whim with no come back. And you won't be able to sign on afterwards for a reasonably long period. Your ability to claim back proffesional expenses is a pain you have to to do a tax return every year.
Where as PAYE. Between you and your employer you sort out paying for the license and medicals before tax and without paying VAT or NI. You have full access to the state benefit system. And you don't do a tax return every year.
MJ
To be honest I think the real reason why the IR won't go for cases is becuase the amounts of money are not cost effective to chase. A FI on under 12k a year is not alot in the grand scale of things. As long as both partys want it no problem. I have always worked PAYE for flying schools. And that was even when working part time. And to be honest I would put a complaint into the IR if I got knocked back because I refused to be payed self employed.
I just made a spread sheet up and you stuck in the amount that was taxable pay and it spat all the numbers out. Cheques were then written. And the columns all tallyed with the big sheet.
I can see the percieved advantage to the instructor if its a part time second job. But with some creative managment you can offset alot that you wouldn't normally dream of getting through as expenses. Usually getting the VAT back as well the tax.
Now the horrible little grunts of hour building FI's. Its a nightmare for them. They will incure breaks in their NI contributions resulting in years of stupid letters wanting them to pay extra into the state. If they are ill its a swine getting sick benefit. All the other benifits are a pain virtually impossible to get low income benifits like housing support etc. Your services can be terminated at a whim with no come back. And you won't be able to sign on afterwards for a reasonably long period. Your ability to claim back proffesional expenses is a pain you have to to do a tax return every year.
Where as PAYE. Between you and your employer you sort out paying for the license and medicals before tax and without paying VAT or NI. You have full access to the state benefit system. And you don't do a tax return every year.
MJ
To be honest I think the real reason why the IR won't go for cases is becuase the amounts of money are not cost effective to chase. A FI on under 12k a year is not alot in the grand scale of things. As long as both partys want it no problem. I have always worked PAYE for flying schools. And that was even when working part time. And to be honest I would put a complaint into the IR if I got knocked back because I refused to be payed self employed.
Last edited by mad_jock; 10th Oct 2005 at 16:16.
Hovering AND talking
Join Date: Feb 2003
Location: Propping up bars in the Lands of D H Lawrence and Bishop Bonner
Age: 59
Posts: 5,705
Likes: 0
Received 0 Likes
on
0 Posts
Ariel,
Yes, those are exactly the points I would expect to be addressed and your get-out is roughly what I suggested some many posts ago.
One of the issues could be, with respect to "how you do your job" - does the school have it's own standard teaching manual/material or has the instructor written their own.
It was interesting what you said about the instructor having to find a replacement if he couldn't make it - that, I would think, would have been a key issue.
Thanks for explaining that; I'm sure it has clarified things for others.
As an aside, one of the most complex industries (apart from financial services which just makes my eyes glaze over) is the construction industry and the "self-employed" sub-contractor. We all know about builders working for cash in hand so a scheme was introduced whereby every subbie had to have a CIS card (construction industry scheme). No card, no pay. This card, issed by the Inland Revenue, would tell any main contractor how the person was to be taxed i.e. basic rate only or gross. It would be quite handy if that scheme was fleshed out and extended to all self-employed persons and industries. Then, as you say ariel, there's no doubt and everything is above board.
Cheers
Whirls
Yes, those are exactly the points I would expect to be addressed and your get-out is roughly what I suggested some many posts ago.
One of the issues could be, with respect to "how you do your job" - does the school have it's own standard teaching manual/material or has the instructor written their own.
It was interesting what you said about the instructor having to find a replacement if he couldn't make it - that, I would think, would have been a key issue.
Thanks for explaining that; I'm sure it has clarified things for others.
As an aside, one of the most complex industries (apart from financial services which just makes my eyes glaze over) is the construction industry and the "self-employed" sub-contractor. We all know about builders working for cash in hand so a scheme was introduced whereby every subbie had to have a CIS card (construction industry scheme). No card, no pay. This card, issed by the Inland Revenue, would tell any main contractor how the person was to be taxed i.e. basic rate only or gross. It would be quite handy if that scheme was fleshed out and extended to all self-employed persons and industries. Then, as you say ariel, there's no doubt and everything is above board.
Cheers
Whirls