Need a legal definition
04 April 2003, 10:03 PM
#1
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OK legal eagles. Just about to get my *** sued for a load of money. I need a legal definition of a P60. I think I know what it is, but if I am wrong my wife and kids get to starve for the next 4000 years. Quick answers for beer/wine/flowers as I can't talk to a solicitor before Monday and I would like some sleep this weekend.
04 April 2003, 10:06 PM
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Surely there is no legal definition of a P60 -- a P60 is an Inland Revenue form. Whatever the Inland Revenue says it is, that's what it is.
I think there is scope for using a P60 'substitute' but all this stuff can be found on the IR website at www.inlandrevenue.gov.uk
PS: Surely you have professional indemnity insurance?
I think there is scope for using a P60 'substitute' but all this stuff can be found on the IR website at www.inlandrevenue.gov.uk
PS: Surely you have professional indemnity insurance?
04 April 2003, 10:08 PM
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P60: 'Annual statement provided by employer to employee showing income and tax paid'
Carl - I do have Pii but it doesn't cover negligent advice. If the above is correct then I am laughing. If not then I am fooked.
Carl - I do have Pii but it doesn't cover negligent advice. If the above is correct then I am laughing. If not then I am fooked.
04 April 2003, 10:09 PM
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If you are/were acting in good faith, then surely you can't be negligent.
I know you do pensions/investments/mortgage advice -- does this involve someone using a fake P60 and then (say) defaulting on payments?
I know you do pensions/investments/mortgage advice -- does this involve someone using a fake P60 and then (say) defaulting on payments?
04 April 2003, 10:18 PM
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Buyer has just got turned down for a mortgage for a 500k house. He gave me an original P60 for 2002, 2001 and 2000. He owns 18% of the company. I put 'employed' on the application form as my belief was that a P60 was a document given to an employee by employer verified by IR. Now lender is claiming that I have been operating outside money laundering regs and borrower is claiming that I should have told him that someone who owns 18% of a company is self employed (according to the lender.) Spoke to Pii people and they tell me that if I have given advice on this basis and it can be shown that the lender is correct then I have given negligent advice and they won't cover it. Buyer is threatening to sue me. Lender is threatening to report me to laundering authorities
04 April 2003, 10:26 PM
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Yes, it is true that mortgage companies treat company directors as self-employed.
But in actuality, that is bull****. Someone in my position (IT contractor) is both a company director (i.e. an officer of the company) and an employee (get PAYE and everything). The Inland Revenue do not class me as self-employed, otherwise I'd be paying Class-something-else NICs for a start.
If someone gets PAYE pay, then they are an employee. There are legal cases defining employee vs. self-employed, some of which have been used for IR35 defences by IT contractors.
This might help:
http://www.inlandrevenue.gov.uk/pdfs...wg2_merged.pdf
I'm not going to look through all 112 pages for you, but page 11 "Who is an employee for the purposes of PAYE and Class 1 NICs" looks good.
I think any mortgage company would be hard-pressed in a court of law to define a company director with a significant shareholding as 'self-employed'. Lots of ex-government-ministers are directors and significant shareholders of major corporations, but are not 'self-employed'.
If, however, there was a box for "company director with >10% shareholding" which you have not ticked, then you could be in the ****. If it was just 'self-employed' vs. 'employed' then I'd go for 'employed' every time -- which is what I do on things like car insurance and home insurance forms.
I suppose the next question is whether he told you he had a shareholding before you put the application in. Or did you assume not, based on the P60s?
[Edited by carl - 4/4/2003 11:27:53 PM]
But in actuality, that is bull****. Someone in my position (IT contractor) is both a company director (i.e. an officer of the company) and an employee (get PAYE and everything). The Inland Revenue do not class me as self-employed, otherwise I'd be paying Class-something-else NICs for a start.
If someone gets PAYE pay, then they are an employee. There are legal cases defining employee vs. self-employed, some of which have been used for IR35 defences by IT contractors.
This might help:
http://www.inlandrevenue.gov.uk/pdfs...wg2_merged.pdf
I'm not going to look through all 112 pages for you, but page 11 "Who is an employee for the purposes of PAYE and Class 1 NICs" looks good.
I think any mortgage company would be hard-pressed in a court of law to define a company director with a significant shareholding as 'self-employed'. Lots of ex-government-ministers are directors and significant shareholders of major corporations, but are not 'self-employed'.
If, however, there was a box for "company director with >10% shareholding" which you have not ticked, then you could be in the ****. If it was just 'self-employed' vs. 'employed' then I'd go for 'employed' every time -- which is what I do on things like car insurance and home insurance forms.
I suppose the next question is whether he told you he had a shareholding before you put the application in. Or did you assume not, based on the P60s?
[Edited by carl - 4/4/2003 11:27:53 PM]
04 April 2003, 10:27 PM
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I'd guess you're not going to get much sleep till monday as I'd say you need to speak to the IR first, and then maybe a solicitor.
The IR are going to be the ones who'll give you the specifics of under what circumstances a p60 can or can't be issued. It may well be (I don't know) that your customer should never have been issued a p60 by the company, in which case Iwould think you may have more of a 'leg to stand on'.
The IR are going to be the ones who'll give you the specifics of under what circumstances a p60 can or can't be issued. It may well be (I don't know) that your customer should never have been issued a p60 by the company, in which case Iwould think you may have more of a 'leg to stand on'.
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04 April 2003, 10:31 PM
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Not true -- if the bloke has had PAYE tax and NICs deducted (i.e. he gets a salary, however small) then he must be given a P60, therefore he is an employee.
There have been cases where company directors and sole shareholders (usually their estate, actually) have sued their own company for negligence
Bit difficult in the UK as although you're required to have Employer's Liability Insurance, as a director you're not allowed to claim on it.
TBH if you've told the bloke to apply for a 500k mortgage on the basis of his P60, then he must be taking a substantial salary
[Edited by carl - 4/4/2003 11:33:12 PM]
There have been cases where company directors and sole shareholders (usually their estate, actually) have sued their own company for negligence
Bit difficult in the UK as although you're required to have Employer's Liability Insurance, as a director you're not allowed to claim on it.
TBH if you've told the bloke to apply for a 500k mortgage on the basis of his P60, then he must be taking a substantial salary
[Edited by carl - 4/4/2003 11:33:12 PM]
04 April 2003, 10:32 PM
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Cheers Carl
the questions were - Employed/self employed
What % of the company do you own.
I answered as he told me employed director and 18%. Took the lender 4 weeks to decide he was self employed.
Your answer confirms my belief on the situation, but given that I have to sweat for two days before someone who might represent me will give me an answer, I am still sh1tting myself
the questions were - Employed/self employed
What % of the company do you own.
I answered as he told me employed director and 18%. Took the lender 4 weeks to decide he was self employed.
Your answer confirms my belief on the situation, but given that I have to sweat for two days before someone who might represent me will give me an answer, I am still sh1tting myself
04 April 2003, 10:35 PM
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My mortgage broker put me down as 'self-employed'. I pointed out the intricacies (limited company, wife sole shareholder, both of us company directors and employees drawing a salary), but he said he was in the same situation (company director and employee) and that is what the mortgage companies expect to see.
The thing is: the mortgage companies are wrong. The problem will be fighting their opinion -- although they are wrong, it costs money to fight....
But you do have enough to go on -- i.e. your opinion was formed on reasonable grounds. Therefore, IMHO, should the worse happen you would be able to get your PI insurance to pay up. Opening stance -- his P60 shows he wasn't paying Class 2 (I think that's the right one) NICs, therefore he isn't self-employed.
[Edited by carl - 4/4/2003 11:36:46 PM]
The thing is: the mortgage companies are wrong. The problem will be fighting their opinion -- although they are wrong, it costs money to fight....
But you do have enough to go on -- i.e. your opinion was formed on reasonable grounds. Therefore, IMHO, should the worse happen you would be able to get your PI insurance to pay up. Opening stance -- his P60 shows he wasn't paying Class 2 (I think that's the right one) NICs, therefore he isn't self-employed.
[Edited by carl - 4/4/2003 11:36:46 PM]
04 April 2003, 10:45 PM
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Look, I only came into this room to refill my wine glass (I'm supposed to be reading Evo....)
But I found this on the IR website:
http://www.inlandrevenue.gov.uk/pdfs/ir56.htm
Now you have to think 'company' and 'individual' here:
If you can answer 'Yes' to the following questions, it will usually mean you are self-employed.
Do you have the final say in how the business is run?
Yes, if chairman, but in reality the decision rests with the board of directors so no
Do you risk your own money in the business?
No, it's the company's money. If it goes down the pan, the limited liability means you owe nothing. Of course this could be complicated by personal guarantees, etc.
Are you responsible for meeting the losses as well as taking the profits?
No. The company is. If it can't meet the losses, you may choose to help out by way of a director's loan, but you're not required to do so. If it goes bankrupt, you can walk away
Do you provide the main items of equipment you need to do your job, not just the small tools many employees providefor themselves?
No, the company pays for them
Are you free to hire other people on your own terms to do the work you have taken on? Do you pay them out of your own pocket?
Yes, though it's on the company's terms. No you don't pay them out of your own pocket, it's from the company's funds -- the stuff it has to pay corporation tax on
Do you have to correct unsatisfactory work in your own time and at your own expense?
No, the company does
[Edited by carl - 4/4/2003 11:45:33 PM]
But I found this on the IR website:
http://www.inlandrevenue.gov.uk/pdfs/ir56.htm
Now you have to think 'company' and 'individual' here:
If you can answer 'Yes' to the following questions, it will usually mean you are self-employed.
Do you have the final say in how the business is run?
Yes, if chairman, but in reality the decision rests with the board of directors so no
Do you risk your own money in the business?
No, it's the company's money. If it goes down the pan, the limited liability means you owe nothing. Of course this could be complicated by personal guarantees, etc.
Are you responsible for meeting the losses as well as taking the profits?
No. The company is. If it can't meet the losses, you may choose to help out by way of a director's loan, but you're not required to do so. If it goes bankrupt, you can walk away
Do you provide the main items of equipment you need to do your job, not just the small tools many employees providefor themselves?
No, the company pays for them
Are you free to hire other people on your own terms to do the work you have taken on? Do you pay them out of your own pocket?
Yes, though it's on the company's terms. No you don't pay them out of your own pocket, it's from the company's funds -- the stuff it has to pay corporation tax on
Do you have to correct unsatisfactory work in your own time and at your own expense?
No, the company does
[Edited by carl - 4/4/2003 11:45:33 PM]
04 April 2003, 10:46 PM
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Carl - I love you 
- The info on the app gave all the correct details as verified by IR forms and company accounts. I know you are basing this on your own experience but as the very least it looks like the Pii will cover it. Decision time M8 - beer wine or flowers?
- The info on the app gave all the correct details as verified by IR forms and company accounts. I know you are basing this on your own experience but as the very least it looks like the Pii will cover it. Decision time M8 - beer wine or flowers?
04 April 2003, 10:47 PM
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Cut of the profits? I'll send you an invoice.... 
PS: Although I have PI insurance, I've never actually claimed on it so I don't know if they'll try to wriggle out of it. But let's face it: you have a logical argument
It's not like you've tried to cover up his shareholding, is it? You've put 'employed' and 'owns 19% of the shares' -- if you were trying to launder money then you're not exactly a criminal mastermind with those answers, are you?
I think the mortgage company is just getting arsey. If you'd failed to declare the shareholding it would be a different mattter. They can't even prove you didn't just make a mistake on the form, can they?
[Edited by carl - 4/4/2003 11:50:58 PM]
PS: Although I have PI insurance, I've never actually claimed on it so I don't know if they'll try to wriggle out of it. But let's face it: you have a logical argument
It's not like you've tried to cover up his shareholding, is it? You've put 'employed' and 'owns 19% of the shares' -- if you were trying to launder money then you're not exactly a criminal mastermind with those answers, are you?
I think the mortgage company is just getting arsey. If you'd failed to declare the shareholding it would be a different mattter. They can't even prove you didn't just make a mistake on the form, can they?
[Edited by carl - 4/4/2003 11:50:58 PM]
04 April 2003, 10:55 PM
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IMHO the mortgage company only turned it down cos they found a technicality and I was calling them every hour for 4 days for an answer. Unfortunately MHO counts for **** all in court
You are more than welcome to 50% of the outcome
You are more than welcome to 50% of the outcome
05 April 2003, 09:08 AM
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I've had some further thoughts on this:
1) There is no legal definition of 'employed' vs. 'self-employed' (according to IR website)
2) Therefore, you have to make a reasonable interpretation yourself.
3) You have based your opinion on the IR advice of what constitutes 'employed' vs. 'self-employed'
4) Therefore you can satisfy yourself (and hopefully your PI insurers) that you have exercised due diligence. It's just that your opinion doesn't align with the mortgage company's
5) I can't see there's anything the mortgage company can do -- you haven't done anything wrong, just based an opinion on advice
PS: Do you work self-employed or via a limited company?
1) There is no legal definition of 'employed' vs. 'self-employed' (according to IR website)
2) Therefore, you have to make a reasonable interpretation yourself.
3) You have based your opinion on the IR advice of what constitutes 'employed' vs. 'self-employed'
4) Therefore you can satisfy yourself (and hopefully your PI insurers) that you have exercised due diligence. It's just that your opinion doesn't align with the mortgage company's
5) I can't see there's anything the mortgage company can do -- you haven't done anything wrong, just based an opinion on advice
PS: Do you work self-employed or via a limited company?
05 April 2003, 07:46 PM
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Well first of all I know nothing about the forms you completed. However I don't see how you can be liable for anything unless I have missed something. You filled in the application form based on the information given to you. The Mortgage company believe that you gave incorrect information, but it appears you didn't.
Based on that information the mortgage company tuned down the mortgage, so why can the borrower sue? As far as I know Motagage companies don't have to lend money, its at their discretion.
Based on that information the mortgage company tuned down the mortgage, so why can the borrower sue? As far as I know Motagage companies don't have to lend money, its at their discretion.
07 April 2003, 09:57 AM
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WOW - interesting one this.
Couple of observations, 'cos I'm not familiar with your industries ethical guidelines.
We see the issue of directors being considered employees or not with regard to payments from the DTI under the Employment Rights Act 1996 regularly in insolvent companies.
As far as the DTI is concerned, if the director is PAYE and can be either removed or out voted by resolution of a meeting of the members (shareholders) of a company, in other words has less than 50% of the shareholding then he or she is generally considered to have employee status.
Doesn't matter if he or she is the only director, the fact that they can be removed by such resolution of the company is the key.
In your case, the individual has 18% which is no where near a controling interest and is therefore dependent upon the continued support of the other shareholders (82%) or he gets the boot. Seems like a pretty strong argument to me for your PI cover.
The individual himself doesn't have a leg to stand on legally as far as I can see, but you could be in trouble with the lender for making the application incorrectly.
Seems to me there should be some extra check boxes on the lender's forms
1 - Employee (non director)
2 - Self Employed (sole trader/partnership)
3 - PAYE Director of Limited company holding less than x% shares
4 - PAYE Director of Limited company holding more than x% shares
5 - other
D
ps - good luck
Couple of observations, 'cos I'm not familiar with your industries ethical guidelines.
We see the issue of directors being considered employees or not with regard to payments from the DTI under the Employment Rights Act 1996 regularly in insolvent companies.
As far as the DTI is concerned, if the director is PAYE and can be either removed or out voted by resolution of a meeting of the members (shareholders) of a company, in other words has less than 50% of the shareholding then he or she is generally considered to have employee status.
Doesn't matter if he or she is the only director, the fact that they can be removed by such resolution of the company is the key.
In your case, the individual has 18% which is no where near a controling interest and is therefore dependent upon the continued support of the other shareholders (82%) or he gets the boot. Seems like a pretty strong argument to me for your PI cover.
The individual himself doesn't have a leg to stand on legally as far as I can see, but you could be in trouble with the lender for making the application incorrectly.
Seems to me there should be some extra check boxes on the lender's forms
1 - Employee (non director)
2 - Self Employed (sole trader/partnership)
3 - PAYE Director of Limited company holding less than x% shares
4 - PAYE Director of Limited company holding more than x% shares
5 - other
D
ps - good luck
07 April 2003, 11:04 AM
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Correct me if i'm wrong but the person applying for the mortgage will have had to sign the mortgage application form that you filled out. When he signs the form he is saying that everything disclosed on the form is true and proper.
Surely you accept no responsibility of this as your client has to check and sign the form, all you are doing is finding him the best deal available. Or is this looking at it too simply?
Gareth
Surely you accept no responsibility of this as your client has to check and sign the form, all you are doing is finding him the best deal available. Or is this looking at it too simply?
Gareth
07 April 2003, 02:54 PM
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I'm not legally qualified, and this is just FWIW:
Another fact to bear in mind is that if the borrower is going to sue you, he has to sue you for "loses". These need to be quantified (I hope an English court wouldn't entertain a plea of mental anguish). What exactly has he lost here? A mortgage - how can he quantify what this loss is? He might be able to sue you for your fee if indeed you did give incorrect advise (I don't think you did, unless the mortgage company gave its definition of emplyed/self-employed in the notes supplied with its mortgage application form and you overlooked this).
Another fact to bear in mind is that if the borrower is going to sue you, he has to sue you for "loses". These need to be quantified (I hope an English court wouldn't entertain a plea of mental anguish). What exactly has he lost here? A mortgage - how can he quantify what this loss is? He might be able to sue you for your fee if indeed you did give incorrect advise (I don't think you did, unless the mortgage company gave its definition of emplyed/self-employed in the notes supplied with its mortgage application form and you overlooked this).
08 April 2003, 10:47 AM
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2 quick calls from a solicitor yesterday morning on my behalf followed by 2 quick climbdowns. As I hoped, they were both spouting crap. Amazing how often the **** hits the fan on Friday evening at 6.00 when everyone is going home and the only thing you can do is speak to the cleaners or quake in your boots until Monday.
PII people also called yesterday to tell me basically what Da Booga said above. When the guy signed the form it became his responsibility.
Lender corporate manager called to say the person I was speaking to on Friday was out of line and he apologised profusely.
Client called to apologise for his bad tempered outburst and asked if I would still consider arranging a mortgage with another company.
Cheers for all the encouraging replies.
PII people also called yesterday to tell me basically what Da Booga said above. When the guy signed the form it became his responsibility.
Lender corporate manager called to say the person I was speaking to on Friday was out of line and he apologised profusely.
Client called to apologise for his bad tempered outburst and asked if I would still consider arranging a mortgage with another company.
Cheers for all the encouraging replies.
08 April 2003, 03:01 PM
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I'm sure I have read that the mortgage advisers responsibility to the accuracy of an application is to confirm the purchaser actually exists, ie ID them by passport, driving licence etc.
If the borrower puts an absolute pile of crock on the form, that's the borrowers problem, not the mortgage broker's.
It only becomes the brokers problem if he knew the application was a little suspect
If the borrower puts an absolute pile of crock on the form, that's the borrowers problem, not the mortgage broker's.
It only becomes the brokers problem if he knew the application was a little suspect
08 April 2003, 04:55 PM
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In answer to dsmith, he is both.
Ask the revenue, employed.
Ask the lender, and depending on which lender, he could be either. At about 15-20% shareholding, with most lenders you swing from employed to more self employed. Note, this is from the lender's point of view, not the revenue.
It is all of course, utter nonsense. The numptie signed the application so how dare he moan at FB, and the lender is a numptie for not sorting earlier. Whatever %age shareholding made him self employed with that particular lender, they had the facts from day 1. There will be a cut off %age shareholding, it is not moveable, so some dopey administrator at the lender has keyed the case incorrectly and look at the outcome!!
Ask the revenue, employed.
Ask the lender, and depending on which lender, he could be either. At about 15-20% shareholding, with most lenders you swing from employed to more self employed. Note, this is from the lender's point of view, not the revenue.
It is all of course, utter nonsense. The numptie signed the application so how dare he moan at FB, and the lender is a numptie for not sorting earlier. Whatever %age shareholding made him self employed with that particular lender, they had the facts from day 1. There will be a cut off %age shareholding, it is not moveable, so some dopey administrator at the lender has keyed the case incorrectly and look at the outcome!!
