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Are you employed or self employed? - HMRC releases new guidance

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HMRC has published an updated employment status leaflet (PDF) which aims to help people decide if they are "employed" or "self employed" - as this will determine how much tax and NI contributions they pay.

The leaflet makes it clear that "your employment status is not a matter of choice", as it is based on the terms and conditions of the agreement you have with who you work for. Clearly, you need to ensure that any agreements relating to your working arrangements (e.g. contracts with clients) accurately reflect your working practices.

The leaflet points our that people working through a company or partnership should also know whether IR35 or Managed Service Company legislation applies to their work.

Employed or Self Employed?

To help you check your employment status, the HMRC leaflet poses the following questions:

Employed - if you answer yes to most of the questions you are likely to be employed:

  • Do you have to do the work yourself?

  • Can someone tell you where to work, when to work, how to work or what to do?

  • Can someone move you from task to task?

  • Do you have to work a set number of hours?

  • Are you paid a regular wage or salary?

  • Can you get overtime pay or bonus payments?

  • Are you responsible for managing anyone else engaged by the person or company that you are working for?

Self-employed - if you answer yes to one or more of the questions you are likely to be self-employed.

  • Can you hire someone to do the work, or take on helpers at your own expense?

  • Can you decide where to provide the services of the job, when to work, how to work

  • and what to do?

  • Can you make a loss as well as a profit?

  • Do you agree to do a job for a fixed price regardless of how long the job may take?

If you can’t answer yes to any of the above questions, you are still likely to be self-employed if you can answer yes to most of the following questions:

  • Do you risk your own money?

  • Do you provide the main items of equipment (not the tools that many employees provide for themselves) needed to do the job?

  • Do you regularly work for a number of different people and require business set up in order to do so?

  • Do you have to correct unsatisfactory work in your own time and at your own expense?

 

You can read the leaflet in PDF format here.

Posted June 23, 2008
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