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Are you employed or self-employed?

The new intermediary legislation introduced on 6 April 2016 makes important changes in order to determine whether someone is employed or self-employed. For example the right to send a substitute is no longer a pointer to self-employment. Now the level of supervision, direction and control the end user is able to exercise over the worker determines the employment status.

According to HMRC supervision is someone overseeing a person doing work, direction is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Control is someone dictating what work a person does and how they go about doing that work.

Clearly the above definitions make it very likely that someone who is self-employed will in fact be subject to some form of supervision, direction or control. Where the definition applies in some way HMRC will classify that person as employed.

How can a worker argue otherwise? In our view if the terms of the service to be provided to the end user are agreed each time between the intermediary and the worker or between the end user and the worker BEFORE the service is started then it can be argued that, once this is done, the worker has total freedom as to how he will deliver the service and hence he can be paid as self-employed.

One final point: To ensure that no one escapes the net intermediaries must return details of all workers they place with clients where the intermediary doesn’t operate Pay As You Earn (PAYE) on the workers’ payments. The return is a report (or reports) that must be sent to HMRC at least once every 3 months.



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