Can I take on somebody to do work for me on a self-employed basis?
My boss has asked me to become self-employed, is this legitimate?
These are questions that I have been asked frequently by clients in my time in practice.
We are treading on very unsafe ground here and, in truth, there is no foolproof answer to the question as there is no specific legislation on the subject of the distinction between employment and self-employment.
HM Revenue & Customs will guide you to one of their questionnaires but, they just give the impression that they wish everyone to be an employee and with the extra National Insurance and less favourable tax treatment that arises.
So what are the rules? Well frankly there are none. It is all a matter of the terms under which you do the work and would be based on fact rather than those written into a so-called contract.
How, therefore, do we make our chances of a successful outcome to a status enquiry more likely? Well, I always advise the following which may be a helpful start for you, with regards to someone wanting to be classified as self-employed:
- Prices should be given for a specific task however long it takes to complete it.
- Any rectification work should be carried out at the self employed worker’s own expense and in his own time.
- There can be no guarantee that the main contractor will find work for his subcontractor.
- No notice period need be given by either party for the termination of the work.
- The worker should provide his own tools and equipment and materials for the task and it is advisable that he obtains his own insurances, such as, public liability and employer’s liability, where applicable.
- There must be the usual element of risk associated with being self employed and in business.
- If the self employed person is unable to carry out the work, he must be able to send a suitably qualified substitute to carry out the work for him.
- VAT registration is preferable.
- Working for a number of customers is also helpful.
- There can be no holiday or sick pay arrangements.
- Instructions usually linked with employment cannot be given and the person providing the work (i.e. client) cannot dictate hours of work for the self-employed person
A general following of these guidelines will point HM Revenue and Customs towards self employment. To ignore the terms and conditions can result in employment status being enforced and back tax, NI and penalties causing much financial distress to deemed “employers”.
If you are unsure about what your situation is and would like to ask some questions regarding what your status would be classified as – please comment below or contact me on 01788 577613 or firstname.lastname@example.org.
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