Getting employment status wrong is one of the most expensive tax mistakes.
The question about employment status and as to whether someone is employed or self-employed is not as straightforward as it might at first appear. Many people assume they are free to choose, but this is not the case.
Although there is no clear-cut answer as to how you decide if you are self-employed or not, the following should be on your checklist:
- The right to get a substitute or helper to do the job
- Mutuality of obligations.
Other factors to consider:
- Provision of equipment
- Financial Risk
- Basis of Payment
- Opportunity to profit from sound management
- Part and parcel of the organisation
- Right of dismissal
- Employee benefits
- The intention of the parties
- Length of engagement.
These are often matters of general employment law and not specific tax legislation.
There is an enormous amount of Case Law in this area and HMRC are not always right.
HMRC do not have the final say on whether somebody is self-employed or not. We can argue your case and present it before the HMRC for you.
There are financial implications and penalties from HMRC if you get your employment status wrong.
Not only is there the question of employees and employers national insurance contributions, being classified as an employee also gives rise to all sorts of employment rights such as holiday pay, maternity pay, unfair dismissal etc.
The decision has to be made by the employer and if you get it wrong it is going to be very hard to recover the back tax, interest, penalties etc from the worker.
We can review your existing arrangements and give you our opinion on whether it will stand up to scrutiny from HMRC. We can help advise on contracts for services to assist you and advise on the best route to take.