Inland Revenue tests employment status in minimum wage case

In a relatively unusual case the Inland Revenue has questioned the employment status of individuals in a bid to deduct tax from their earnings under National Minimum Wage (NMW) laws.

The Inland Revenue, which is responsible for enforcing the minimum wage, began an investigation into the earnings of stewards providing refreshments on long-distance coaches. The stewards bought and sold the refreshments themselves and had the right to keep any profits.

The Inland Revenue argued that the individuals were workers and not self-employed. This meant that they had the right to be paid at least the NMW but also that they had to pay tax and national insurance on their pay. The stewards and the coach company denied that they were workers, arguing that they were independent contractors. They said they did not earn "wages", did not have to be paid the minimum wage and were therefore not required to pay employed persons' tax and National Insurance.

The Employment Appeal Tribunal rejected the Inland Revenue case. It held that the contract had not been entered into merely as a way of avoiding NMW legislation and that in this case it was clear that the individuals did not see themselves as employees.

* Smith (National Minimum Wage Compliance Officer of the Inland Revenue) v Hewitson and others 489/01

In brief