Whether an individual is employed or self-employed is often far from clear, it is a case of shades of grey rather than “black and white”. There have been numerous court cases over the years, and the judgements in these cases form the law on this area.

HM Revenue & Customs have recently published new guidelines to help taxpayers decide if they are employed or self-employed. We have reprinted below some of the criteria that they suggest you use in order to arrive at a decision. This information might be helpful in certain situations and to certain people, however what HMR&C say is not necessarily the law. Please do not hesitate to contact us for further assistance in this complex area.

The comments that follow are quoted from the HMR&C publication.

“In most cases your employment status will be straightforward. In general terms, you are employed if you work for someone and don’t have the risks of running the business. You are self-employed if you are in business for yourself and are responsible for the success or failure of that business.

To help you check your employment status, answer the following questions. These also apply if you are a casual or part-time worker. If you have more than one job the same questions apply for each job.

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?”

Please note that the opinions quoted above are those of HMR&C; we do not necessarily agree with all of the comments made! If you are at all uncertain about your tax status can we suggest that you give us a call and we will provide you with advice based on your own individual circumstances.