As an employee, we can often be blissfully unaware of the things which our employer automatically takes care of but if you’re considering an interim career that’s set to change in a big way.
Jennifer Smith is Employment Partner at leading Manchester law firm JMW, here she explains the legal obligations and some practical considerations:
A Legal Definition
Whilst you’ll now be referring to yourself as an Interim manager or perhaps a Consultant as far as the law goes you’re now ‘ self-employed’. A self-employed person is usually defined as a person who is genuinely in business and working for themselves. This is in contrast to a worker or an employee who work under a contract of employment or any other contract whereby the individual undertakes to do or perform personally any work or services for another party.
You need to register with HMRC
Once you set up as a sole trader or in a partnership, you are legally obliged to register as such with HMRC. This will allow HMRC to know how much you’re earning so it can properly collect tax as you will be responsible for paying your own income tax and National Insurance (NICs). Guidance on how to register as self-employed can be found on the Government’s website.
You may need to register for VAT
If your annual turnover is above the VAT threshold (£85,000 for the 2018-19 tax year), you must register for VAT. You can register voluntarily if your turnover is less than £85,000 unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT and from the effective date of registration you must: charge the right amount of VAT; pay any VAT due to HMRC; submit VAT Returns and keep VAT records and a VAT account.
You need to maintain financial records
You’ll need to keep records of all sales and income; all business expenses; VAT records if you’re registered for VAT; PAYE records if you employ people and records about your personal income. You must make sure that your records are accurate and you must also keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.
It’s best to protect yourself and your business
Whilst it is not a legal obligation, if you are self-employed, it is advisable to obtain insurance as you will be held responsible for any defaults or legal claims. Incapacity insurance can be particularly helpful for the self-employed, as it could mitigate any financial losses of injury or sickness.
Your rights are changing – a lot.
Employment law does not grant the same protection for self-employed people, in most cases because they are their own boss. Critically, being self-employed means forfeiting important rights including the below:
- The right not to be unfairly dismissed;
- The right to receive a statutory redundancy payment;
- Statutory sick, maternity, paternity and adoption pay;
- Rest breaks and paid holiday.
Health and Safety rules still apply to you
Those who are self-employed still have protection in the workplace for their health and safety as well as discrimination on the grounds of a protected characteristic.
The loss of some of your employment rights can be viewed as rather undesirable however it’s important to balance this with the obvious benefits an interim career offers and that includes the ability to make all the decisions surrounding your career and business, as such you can choose to engage a trusted advisor to help you navigate the new legal landscape as self-employed person and once that’s done you’re free to enjoy the freedom, flexibility and greater scope of work your new interim career will provide.