Sutton Coldfield based accountants Weatherer Bailey Bragg are warning individuals to give a second thought to the tax status of a worker. Whether someone is classed as employed or self-employed for tax purposes is ascertained by reference to case law, rather than to statute, so while there is nothing to clearly define the specifications of an individual’s status, there has been some criteria established that should be adhered to.
If you own your own business, can not be controlled in terms of when, where and how you work, and have the right to choose and if you are free to hire other people to work for you, or to help you at cost to yourself, then you could be classified as self-employed. On the other hand, if you are contractually bound to work a set amount of hours, have a set amount of pay and are answerable to someone who is accountable for the business, you could be classified as being employed by a third party.
The responsibility for ascertaining the correct tax status, however, belongs to the engager of an individual, instead of the individual themselves. While the established criteria should make it relatively easy to define whether or not an individual is self-employed, the onus is on the engager to make sure they know for certain.
Steve Horsley, Tax Partner explains: “HMRC are likely to back date any income tax, National Insurance Contributions and interest charges for the entire period that wrong tax codes are declared and expect the engager to make good the missing funds. So although the prospect of not having to pay Employers National Insurance Contributions, sick pay and holiday pay, for example, may seem appealing, the financial risks involved in simply taking an individual’s word on their tax status should not be underestimated.”
For more information contact Weatherer Bailey Bragg on 0121 355 1901