Getting employment status wrong is one of the most expensive tax mistakes.
The question 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
Fundamental factors to consider:
- 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
- Intention of the parties
- Length of engagement.
The cost if you get it wrong is enormous. Not only is there the question of employees and employers national insurance, 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.
Please contact us if you need further advice or have any questions about our services.