However, in a complex society such as ours, there are all sorts of regulations which end up turning a simple idea into an administrative nightmare. This all stems from the nature of the engagement of the PA and its taxation status.
Nearly all PAs would be seen by HMRC and any legal authority (Employment Tribunal etc) to be employees of their PA user. Only in the most exceptional circumstances, where a PA is engaged to perform specific tasks without any control over how they perform them and is then paid by reference to each piece of work, would they be deemed to be genuinely self-employed. If you engage a PA and pay them by the day or the hour, you are their employer.
As an employer, the PA User is obliged to have Employer Liability insurance and to operate a PAYE Scheme, deducting Tax / NIC from the PA’s salary payments and paying Employer NIC themselves. There are also various obligations under Employment Law – such as administering and paying Holiday Pay, operating a Workplace Pension and making Statutory Payments. These represent a serious burden for an individual with limited resources.
Many PA Users believe that the employment issue can be easily circumvented by engaging a PA who is already registered with HMRC as being Self-Employed. However, this is simply not the case…someone can have a business (a self-employment) but that does not mean that all work they undertake can be treated as part of that activity. As indicated above, the arrangements for an engagement determines its taxation status, not the person who performs the role. The work involved means that in most cases a PA does a job!
When a PA User takes someone on to act as a PA – and pays them directly without operating PAYE – HMRC can hold them liable for the Income Tax and National Insurance payments that would otherwise be due. This is because it is a false self-employment, not reflecting the working arrangements which are those of a job.
Engaging a PA through an Umbrella Company protects the PA User from liability whilst avoiding the administrative burden and cost of direct employment.