Outsourcing is without doubt a great way to grow your business and work more efficiently using expertise not necessarily available within your business. However, as is the way, you do need to be careful about the implications of outsourcing when it come to HMRC. You might think the person is a subcontractor, but HMRC might look at them as an employee and therefore expect you to pay their tax and National Insurance. Or if you are a limited company working for someone it could be you that becomes liable in the eyes of the taxman.Why does HMRC even care? Money of course. They get more income from employer/employee situations due to National Insurance payments.
The financial side of running a business can be very scary to those just starting out. Entrepreneurs coming from the security of an employer who sorted all the tax and national insurance are often daunted by the prospect of taking on these tasks. This is an important topic, which any business owner must take very seriously.