Employed vs. self-employed

The question of whether someone is employed or self-employed is a common source of concern, and is increasingly of relevance in all types of business.

From April 2007, the new construction industry scheme will bring this issue centre stage once more, with contractors of every size being required to review the employment status of their workers for each engagement, and once a month signing a declaration that they have done so and are satisfied that their workers are self employed.

The usual checklist of issues should be considered when confirming if a worker is employed or self-employed, such as who provides the tools, who directs the hours worked and the jobs undertaken etc. The recent 'Demibourne' case however highlights that in addition to this it is important to look at the bigger overall picture.

The basic facts of the case surround a worker who worked as a handy man.  He was employed for a number of years even though under the terms of his contract there were a number of things that, had it been in question, could have pointed to him being self-employed, i.e. he supplied his own tools, worked under his own direction and purchased materials etc as and when he saw fit.

The worker was required to retire at a certain age and when he reached this age the employer was not permitted to re-employ him.  In a mutual agreement they therefore agreed to take him back on but on a self-employed basis instead. 

In reviewing the facts of this case, there are a number of strong indicators of self-employment. Many of us would have come to the conclusion therefore, having reviewed these indicators, that upon his re-engagement he was correctly treated as self employed.

However, the Revenue ruled (and won their case) that, as the working arrangements had not changed since he was previously employed, the worker must still be an employee in spite of the fact that the terms of the engagement suggested otherwise. 

This case has shown that if whilst employed there are somewhat unusual terms and conditions in place which are akin to self employment, substantial changes are required to achieve self employed status instead.

For any questions on this article or about the issue of employed vs. self-employed please call Janice Offer or speak to your client manager.

SME’s advised to embrace charity scheme.

A new initiative implemented by the Government is urging SME’s to sign up to a new scheme called ‘payroll giving’. As a result those who sign up before 31st December 2006 can benefit from a cash payment of up to £500 for making the new scheme available to employees.

The aim of the new scheme is to make it easy for employees to make donations straight to any UK charity straight from their salary allowing them to qualify for immediate tax relief. Also until March 2007 the first £10 of each employee’s donation will be matched pound for pound over a period of 6 months.

To read more on the payroll giving grants please use the following link: http://www.payrollgivinggrants.org.uk

Quote of the week

"If I have ever made any valuable discoveries, it has been owing more to patient attention than to any other talent."

Isaac Newton