The question if someone is employed or self-employed is not as straightforward as it might seem. Most people think they have a right to choose, but this is not the case.
Although there is no clear answer on how you decide if you are an employee or a self-employed individual, the below should be on your checklist...
Fundamental factors to consider:
- The right to get a helper or a substitute to do the job;
- Mutuality of obligations.
Other factors to be considered:
- Equipment provision;
- The financial risks;
- Payment basis;
- Opportunities for profits from good management;
- Part & parcel part of the organisation;
- The right of dismissal;
- Employment benefits;
- The parties’ intentions;
- Duration of engagement.
Often such matters are subject of general employment law and non-specific tax legislation. There’s a significant amount of Case Law in this field and HMRC are not always right. They don’t have the final word on whether somebody is self-employed or not. We can argue your case in front of the Tax Commissioners on your behalf.
The costs could be enormous if you don’t get it right. First there is the question of employees and employers national insurance and being classified as an employee also rises all types of employment rights such as maternity pay, unfair dismissal, holiday pay, etc. This decision has to be made by the employer but if you get it wrong it will be very hard to recover the back tax, penalties, interest, etc. from the employee.
We can check your current arrangements and give you an opinion on whether it can stand up to an attack from the HMRC. We can also provide an advice on contracts for services in order to help you improve your chances.