Chapter 7 - Employed or Self-Employed

Question 1

Introduction

Answer 1

Distinction between the two is based on HMRC practice and case law. Employment status is not a matter of choice. It depends on the terms and conditions of the engagement.

Question 2

Determining Employment Status

Answer 2

There is no single test governing the question of employed or SE’d.

Question 3

Factors to Consider

Answer 3

Mutuality of obligation
Right to control
Provision of own equipment
Right of substitution and engagement of helpers
Financial risk
Opportunity to profit
Degree of integration into the organisation
Right to terminate the contract
The number of paymasters
This is not exhaustive but it does include the most important criteria

Question 4

Mutuality of Obligation

Answer 4

Where an engager is under an obligation to provide work and the worker is under an obligation to accept the work and to perform tasks asked him, it usually points to employment.
The existence of any obligation will usually be obvious from any service contract between the parties.

Question 5

Right of Control

Answer 5

In an employment relationship, the employee has little control on what they do day-to-day. It’s more likely employment where a worker is told what to do. Self-employed people control their own work mostly

Question 6

Provision of Own Equipment

Answer 6

Who provides the tools? Employees rarely have to provide equipment. Someone SE’d will be responsibly for their own equipment

Question 7

Right of Substitution and Engagement of Helpers

Answer 7

An employee can’t send a substitute in their place or be engage the services of a helper or assistant

Question 8

Financial Risk

Answer 8

Individuals who risk their own money on ssets for the job or paying running costs, overheads and such are almost always self-employed. Self-employed must also quote the price of work, risk of making a loss is a good indicator

Question 9

Opportunity to Profit

Answer 9

If a person’s profit or loss is tied to ability to reduce overheads, and work effectively, they’re likely self employed.

Question 10

Degree of Integration

Answer 10

If you have a desk, computer, company email etc, you’re employed.

Question 11

Right to Terminate Contract

Answer 11

A right to terminate an engagement with written notice is more common for employment. If a worker provides services for numerous businesses they are likely SE’d