independant contractors and PAYE/SITE

[duncan drennan]

I'd like to know whether tax payed on behalf of independant contractors should be subject to SITE.

I thought that this would not be the case, but SITE was payed on behalf of my wife by the people making use of her services. Now I think that money should have been PAYE (as she is not an employee).

What is the correct method?

[Dave A]

The best way to clarify is to get a tax directive from SARS.

It's in writing - the position is clear and everyone is protected.

The "employer" might be concerned that your wife would be viewed as a part time or temporary employee - in which case SARS might hold them responsible for not deducting tax. So they "played safe".

Anyway, long and short of it, in marginal cases get a tax directive.

[Dave A]

Sorry - that was a "quick look see" post - been a busy day and more tonight. But another quick thought -

It might be an idea to set up as a cc if she's an independent contractor.

As for it being classified as SITE, I'll have to look at the guide tomorrow if somebody else doesn't post the answer before.

[duncan drennan]

As far as CC, she has to practice as a sole prop due to being in the medical field (she's an OT).

I had another look at the IT34 though and it seems correct as it (no complications due to not being able to claim back SITE), so I'm not going to worry about it too much.

Most of the complications came from a stubborn accountant...

[Robbo]

More PAYE

The "catch-all" aspects of the Labour Broker/Independent Contractor legislation are a serious brake on work.

I have been approached by a company in East London to undertake a contract at one of their clients in Buffalo City. They had previously agreed a fee with their client. We agreed a retainer type of contract which has me based at their client with minimal contact with them, and my paying my own travel and subsistence. Since I live in Durban, these elements are substantial, at around R20K per month.

A monthly invoice would set out fees and expenses plus VAT from my cc to them. They would (hopefully) pay the invoice.

This arrangement was defined as an "arms-length" relationship to prevent any intimation of an employer/employeee relationship.

However, their accountants/HR are saying that they must deduct PAYE before paying me, a circumstance which makes it impossible to take up the contract, since it leaves about R5k per month after PAYE and expenses are deducted.

Is it possible for a Sole Member cc to be employed as an Independent Contractor, or have SARS sufficiently scared off all potential employers into not allowing any business relationship of this type.

[Dave A]

I have been approached by a company in East London to undertake a contract at one of their clients in Buffalo City.

Is this company in East London that approached you a labour broker?

[Robbo]

I guess so, they have other contractors posted at other clients. However, they may have "employed" them, based on the revised contract they have now presented me with.

[Robbo]

Labour Broker, Employee and PAYE

Hi,

Since my last post, I am becoming more and more confused by the Independent Contractor vs Labour Broker vs Employee situation.

To sumnmarise, I am the Sole Member of a VAT registered cc, the business purpose of which is to supply IT services, i.e. sell hours. I fully expect to have several clients in any one year, clients that will be sourced either through my own efforts, or increasingly through third parties.

My normal practice is to invoice the client or the third party an agreed fee each month based on hours worked and expenses incurred. What I am finding is that increasingly third parties are refusing this arrangement, setting up an employer/employee arrangement and taking statutory deductions.

When I query this, they usually state that I must either obtain a SARS directive or be a Labour Broker with a valid IRP30 to avoid this happening and it's all the fault of SARS anyway.

First point, they are acting as the Labour Broker between my cc and their client, so I fail to see why my cc must also be a labour broker.

Secondly, SARS do not issue directives anymore, and provided that: 1 - I present a VAT invoice to the third party; 2 - work only at the client premises under the client's, and specifically not the third party's control; then it is fine to be paid witho no deductions.

As a result in some cases I cannot take up an assignment because the fee minus deductions is close to or less than my expenses in carrying out the assignment.

I cannot believe that the intention of SARS is to prevent the operation of bona-fide Independent Contractors. Does anyone have experience or advice in how to resolve this situation.

Cheers and TIA.