Tax Disputes & Investigations

Employment Status issues/disputes – Employed or self-employed?

It would appear that HM Revenue & Customs (HMRC) preference would be to treat everyone as an employee and pay tax via the PAYE/NIC system! HMRC regularly challenges the employment status of workers and these enquiries are amongst the most difficult to handle and resolve. The amounts of money at stake can be significant and the future costs of an "employed" ruling can make a business uncompetitive and unattractive to prospective workers.

There is no legal definition of an "employee" (who works under a "contract of service") and a self employed "worker" (engaged under a "contract for services"). As such, a business has to consider a huge amount of information (including case law, Employment Tribunal rulings, Tax Tribunal judgements and more) before deciding whether someone is a worker or an employee. The leading case in this area is still Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance, which dates from 1968.

HMRC has specialist Status Inspectors who work only in this area. The construction industry is a common target, but any self employed worker engaged by a business brings a risk of challenge, including Directors who act as consultants to their own companies. All businesses operating within the construction sector are required to sign a monthly declaration that they have considered and reviewed the status of their workers (see also the Construction Industry Scheme).

As a guide (this list is not exhaustive), if a business answers "yes" to all of the following points then its workers are likely be employees: -

• Do your workers carry out all of the work in person or do they have to ask your permission if they wish to get someone else (a "substitute") to do some or all of the work?
• Do you manage your workers day-to-day, including moving them from one task to another? Do you check and supervise their work while in progress?
• Do you try to find new or additional work for your workers? Do you pay them when no work is available? Do you have to give them a period of notice (however small) if you don't want to use them anymore?

Many businesses have previously drawn up "self employed contracts" for workers (often with professional help). These contracts often contain all of the phrases and clauses believed to "guarantee" self employment. However, the Courts are increasingly considering the realities of the working arrangements rather than the wording of the contracts. This was demonstrated in the case of Weightwatchers (UK) Ltd v HMRC where inconsistencies between the contracts and what actually happened in practice led, in part, to a HMRC victory.

In 2010, the UK Government again began to consider whether new rules should be introduced for workers in the construction industry, which would automatically deem them as employees for tax purposes unless all materials, plant/machinery and labour were supplied by the worker. Further developments are expected in this area and businesses nned specialist help to ensure that they keep up-to-date with this changing area of legislation.

How can OneE TDI help?

OneE TDI provides expert advice to its clients in a number of areas, including: -

• Review of and opinion on existing contracts;
• Drafting of contracts, agreements for services and similar;
• Managing and resolving any HMRC status enquiries; and
• Changes to working conditions (to help support self employed status).

It is common misconception that just because a worker is registered with HMRC as self employed that this confers that status on any and all work that they do. This is wrong – it is actually possible to be both employed and self employed at the same time! Although HMRC's website contains a great deal of information about employment, it is often overly simplistic and impartial, specialist advice in this complex area of law can be invaluable.

At the core of OneE TDI is a highly experienced team specialising in all areas of tax disputes and investigations work. We offer confidential, non-judgemental advice to best defend our clients and have a proven track record in successfully managing all contentious tax matters. We have successfully defended numerous businesses challenged by HMRC under Employment Status and ensured that any enquiry or dispute with HMRC was resolved quickly, fairly and with little disruption to the business itself. We provide a comprehensive service to accountancy and legal practitioners and their clients. Our advice saves our clients time and money and helps reduce their potential exposure to tax, interest and penalties.

Putting it simply, we take control of and manage all issues relating to Employment Status so you can get on with your life and your business. What price peace of mind?

Please see the Testimonials kindly provided by our clients (or their accountants or lawyers), which confirm our levels of client service.

How can I contact OneE TDI?

If you would like a free, no obligation discussion with us, please contact either Gary Rowson or Mark Taylor on 0800 652 6156 or complete and submit the online form below.

Whilst we endeavour to provide informative and accurate information, the content on this site is for general information purposes only and should not be taken to constitute tax or legal advice which must always be tailored to individual circumstances. Please contact us if you would like to discuss matters.

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