Earnings made from freelance software projects website

[hac]

Hi all, I am applying under self-employed category for HSMP and i am going to claim my previous earning points from the payments i received through freelance software auction projects websites.

Under self employed category ; in guidance notes they have mentioned to provide "COPIES OF CONTRACTS AND INVOICES" to claim total amount mentioned.

Now , I do have ORIGINAL PAYMENT RECEIPTS sent by that website and i just have them signed and stamped from them on their website letter head .. so What about contract ? aren't only payment receipts enough for me to claim the points ? since thats the freelance website ?

I will appreciate if any can reply and help me out of this who has already applied in this scenario and got HSMP approval.

I will be very thankful

Thanks
Hussain

[pantaiema]

The serious Job is normally initiated with contract. And pay in installment into several stage. You invoice them after you have commited the certain percentage of job.

Pantaiema

Hi all, I am applying under self-employed category for HSMP and i am going to claim my previous earning points from the payments i received through freelance software auction projects websites.

Under self employed category ; in guidance notes they have mentioned to provide "COPIES OF CONTRACTS AND INVOICES" to claim total amount mentioned.

Now , I do have ORIGINAL PAYMENT RECEIPTS sent by that website and i just have them signed and stamped from them on their website letter head .. so What about contract ? aren't only payment receipts enough for me to claim the points ? since thats the freelance website ?

I will appreciate if any can reply and help me out of this who has already applied in this scenario and got HSMP approval.

I will be very thankful

Thanks
Hussain

[gordon]

If these are at-will arrangements form which you're earning (so-called gentlemen's agreements without pre-arranged contracts), you might want to obtain letters confirming post hoc that the earnings were paid and received (and for what services rendered and when). You'll then need to show that the proceeds were deposited into your bank account.

You should confirm that you are self-employed rather than an independent contractor (refer to HMRC for their definitions). For the latter, you'd need:
- contracts (pre-arranged or post-hoc)
- tax returns (issued by the contracting body and reported to tax authorities)
- invoices (payment advice from the contracting body to you, rather like payslips)
- bank statements (showing deposits)

The standard seems to be rather higher for showing self-employment, and it doesn't sound like you have business accounts (audited or otherwise). in any event, that you characterise the work as 'freelance' suggests that you're better described as an independent contractor. (I had freelance work for which I claimed income as an independent contractor, and I was approved for HSMP.)

AG

[narayans_007]

I am also planning to claim points under past earnings as independent contractor. I have a small doubt over here. Should the payment advice include details about the tax payments. Normally contractors take care of declaring income with authorities and paying the taxes. So, paying client has nothing to do with taxes.

@gordon, how was it in your case

[gordon]

The invoices will show the gross amount paid only, so you're right about the nil tax withholding. Where I am (in the US), however, the client is obliged to report gross payments to me to the tax authority (IRS), for which the client sends me a copy at the end of the tax year (Form 1099-misc). I then use this tax return (1099) in my tax self assessment due a few months after the tax year ends. In the US, tax withholding by the paying party would indicate a salaried relationship; where absent, it's considered independent contracting.

So when I applied for HSMP, I showed:
- contracts (from client, after the fact, showing gross amounts paid for period jan-06 through dec-06)
- invoices or payment advice (detailed cheque stubs from client, showing gross payments to me for same period)
- tax return (from client, also showing gross amounts paid to me, Form 1099-misc, reported to IRS, calendar/tax year 2006)
- bank statements (showing gross amounts payable to me - in my case, as bank deposits of paper cheques)

I also included my invoices to the client, indicating my demands for payment (how I usually understand the term 'invoice') - but these were supplemental and not expressly requested for the initial HSMP application.

I hope that helps - I am entirely out of my depth on non-US tax structures for independent contractors, I'm afraid.
AG

[narayans_007]

gordon, Thanks a lot the information. My understading of invoice also same. I raise invoice to paying party demanding the payment to be made. But the HSMP guidance sheet asks me for invoices from employer with the details of payments to me. Thats where I am confused.

And I dont get any payment advice, regularly as my payments are done through bank transfer directly by paying party/employer. I am planning to claim for earnings starting from this year, for which I dont have tax documents yet. So, out of 4 required documents I have only two. Is it okay If my client gives me kind of payment details letter on letter head detailing payments made to me. And I will include my invoices sent to the payer.

Can we submit the print out of bank statements taken online or should they be on letterhead of the bank?

[gordon]

So it sounds like you have one item - bank statements (wire transfer documentation). I had online bank statements, so I printed them out and asked the bank manager to stamp and sign them.

Contracts: you have these already?

Tax returns: It's just necessary to explain in your letter that the tax year hasn't yet completed for the period in which income is being claimed.

Invoices: A letter from the paying party confirming that the terms of the contract have been fulfilled, indicating payments made to you and when, should substitute adequately for the payment advices, I think. The letter should be detailed, indicating each payment (to correspond perfectly with the wires). Did the paying party not send you a confirmation letter each time they direct-deposited payment?

Can you get an accountant's letter? I didn't have this (because it wasn't an option in the earlier guidance notes, which I used in preparing my application in March), but it sounds like a viable option now, if you can get it. Apart from this last item, you would then have three of four, which sounds like is now sufficient. But make sure that all the numbers match up.

[In reading the current guidance notes, I can't tell the difference between 'invoices from the employers showing the actual amounts paid to you' in the primary list in section 59, and 'invoice explanations/payment advice for the full period claimed' in section 60. Can you?]

AG

[narayans_007]

No, I dont get any confirmation letter from my client after each payment.

I have the following documents

1)Contract papers

2)Online bank statements, which ofcourse should be signed and stamped by banker

3)My original invoices - as you said only supplementary. This will help only to explain how each payment is arrived from the rates described in contract ( No. hours *rate)

So, next thing I have to do is to get a letter from paying party with detailed break up of each payment made to me.

This makes it 3 documents out of 4. I will explain in the covering letter to consider the evidences with tax documents as exceptional case.

Even I cant find out the difference between invoice in section 59 and invoice explanations/payment advice.

Thanks a lot gordon, your information is helpful in proceeding with the application. By the way what is the duration of initial HSMP visa you have got? Some people here say one year and some say two years. So, I am confused.

Regards,
Narayan

[gordon]

My initial visa is for two years; my understanding is that some were given one-year visas prior to Nov-06 (when the HSMP criteria were overhauled), but I think everyone thereafter is to receive an initial two-year visa.

AG

[narayans_007]

Hi gordon,

I applied for HSMP as independent contractor. I got it approved. Now I have to start the EC process.

Your posts were really helpful. Thanks a lot!

Regards,
Narayan