Self-Employed PAYE [SEP]

SEP (Self-Employed PAYE)

Since new legislation came into effect this April 2014 aimed at ending what the government terms “false self-employment”, we have adapted to the legislative changes by introducing a method of self-employment alongside CIS called SEP (Self-Employed PAYE). We have attended many seminars and meetings in regards to the new legislation and sought professional advice from tax specialists on the matter.

What is SEP?

SEP allows us to categorise the worker as self-employed for employment purposes, but does not allow the individual to claim expenses, as this can breach the rules of NMW (National Minimum Wage) Therefore this method of engagement is within the spirit of the new legislation. Generally SEP is aimed at a minority of contractors that are on rates which fall close to NMW and cannot be paid through an Umbrella Company. Although they cannot claim expenses through Bar 2 on a weekly basis, they will be able to complete a self-assessment at the end of the financial year to claim tax relief; in certain circumstance Bar 2 will apply for an early rebate on the worker’s behalf.

In order to be categorized as self-employed and taxed under the rules of CIS, it has to be proven that there is no right of Supervision, Direction and Control [SDC] as to the manner in which the services are provided.  For skilled trades’ people it is normal for there to be an absence of SDC as to the manner in which they do their work, however for unskilled and semi-skilled workers this is almost impossible.  If these workers provide services independently of recruitment and intermediary companies is it possible that they may wish to retain their self-employed status, for these people we will automatically apply the rules of PAYE to their pay.

The minimum hourly rate that we can accept when engaging under SEP is £7.10 in order to avoid breaching National Minimum Wage.