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IOL Blog - Comment from the Institute

 

It’s a question of status

Published on 31 March 2017

It’s a question of status

The outdoor learning sector delivers its services through a range of business models like many other sectors in the UK economy.  It is a vibrant mixture of profit led, public sector and charitable businesses ranging from the self employed model to the large scale multiple site based employer.  Recent efforts by the HMRC to clarify the status of workers in the UK is helping to make a little clearer the rights and responsibilities of employers, employees and the self employed.

This is not the place to go into the detail of various legislation that impinges on the issue of ‘are you self employed or an employee’ – in fact there is no single piece of legislation relating to specifically to this.  It is though worth considering some of the key indicators of your status as it has important implications for tax, hence the HMRC interest. 

There is a wealth of advice on the web and a recent legal case involving a car cleaning firm in 2016 has promoted more guidance.  The overarching lesson to take from this case is that it doesn’t matter what the contract says between the contracting organisation and the contractor, it is what actually happens in reality that the courts will take notice of.  In this case, on the face of it there was an all important ‘contract for services’ in place as you would expect with a self employed contractor but in reality, the way in which the contractor was treated and behaved was no different to an employee.

The HMRC has moved to help all parties to be clear about employment status.  If you are unsure it is worth using their recently launched online employment status tool . I have tested it and found it helpful.  The HMRC are pledging to stand by the results of this tool providing the questions are answered honestly and accurately – back to the point that what you say in a contract and what actually happens has to be consistent!  The tool is anonymous so you can safely test your current position.

As already stated there is no clear single piece of legislation here but there are some key questions to consider when trying to identify if a contracted individual is an employee or self employed.  The following table is from the well respected charity the Low Incomes Tax Reform Group

 

Employed

Self-Employed

Method of payment

Paid a regular wage by the day, week or month

Invoice the client for work done

Who has control over how work is done?

The way you do your work is supervised

You are trusted to do the work yourself - as long as the final product is up to standard

Where do you do the work?

At the place required by your engager

At a place you decide, although some jobs might have to be carried out 'on site'

When do you do the work?

You are required to turn up at a certain time and work the agreed hours

You have freedom to decide when you do the work, in consultation with you engager

Benefits

You are given rewards other than in cash for your work, such as vouchers, free or cheap meals, a company car or shares

You tend only to be paid in monetary form - cash, cheque or bank transfer - rather than 'in kind' although some businesses might engage in 'barter' transactions

The work you do

Your engager can move you from job to job as needed - for instance, you may have to cover for someone who is sick

You only do the particular job which you agreed to do, unless you subsequently agree a change in terms of providing your services

The number of jobs

You have one job at a time, or a small number of regular jobs, such as one in the morning and one in the evening

You work for a lot of people and you juggle their requests like a builder or a taxi driver

Your role

You have a recognised role at the place where you work - for instance, people may report to you, or you may be listed in the phone book

You are an independent provider of services and not a permanent part of the engager's business

Your business?

You do not run a business from home or other location, although you may work from home if this is approved or demanded by your employer. When you need another position, you apply for jobs for example by contacting the Jobcentre or an employment agency, or answering advertisements online or in the newspaper

You have a business which you run from home - for instance, you advertise your services through yellow pages, you take appointments, you have your own business cards, you are VAT registered

Who does the work?

You do the work yourself

You may send someone else to do the work for you, if you run a business, or arrange for a job to be done and you supervise others whom you bring with you. For example, if you are a gardening business, you might take on a job landscaping a 2 acre garden. You would be unlikely to do it all yourself, but you would quote a price for the job and in turn pay other people to help you

More information can be found at LITRG guidance on employment status

In a sector with its own specific health and safety legislation some of the questions above point to the contracted individual being an employee but contracting in individuals with specific skills and qualifications does not make them an employee.  It is important to note that not all the above are equally waited and the following issues all point to a genuinely self-employed worker:

·         independent  provision of service, able to provide a substitute;

·         option to turn down work;

·         autonomy of practice at certain levels;

·         the number of clients a contractor has;

·         the demonstrable selling of services to others;

·          a contract for services between the contracting organisation and the contractor is in place, including approach to invoicing & payment terms.

As an employer it is worth testing this with your self employed freelancers.

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Author: Andy Robinson

Categories: IOL Blog, Business management

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