Checklist: Are you really self-employed? 




Here are some important factors to consider when working out whether someone is genuinely self-employed. Bear in mind that employers can deliberately manipulate these factors to try to avoid employment rights.
A genuinely self-employed person normally:


• provides their own equipment;



• need not wear a branded uniform or drive a branded vehicle;



• can work for other organisations if they want to;



• can contract with other people of their own choosing to complete the assignment, such as apprentices or sub-contractors;



• is responsible for their own expenses;



• takes on the financial risks of business failure and profits from business success; 



• controls their own pricing. A genuinely self-employed person negotiates a price for services to be provided, and freely invoices for those services (as opposed to having the “price” set by the organisation receiving the services and/or having their “invoices” generated by that organisation);



• is not paid wages or a salary, and is not entitled to the National Minimum Wage;



• is not subject to a formal “performance appraisal” process, either directly or via customer review or feedback;



• is not tightly controlled as regards the way tasks are performed;



• sets their own hours and is not closely monitored (for example through vehicle tracking or other software);



• takes holidays when business demands allow, saving up to cover the cost of holidays. There is no “holiday pay”, since this is their own business;



• does not get sick pay;



• is not subject to a disciplinary procedure; and



• cannot be “sacked” or dismissed. Instead, termination is based on commercial terms negotiated between the business and the service provider at the start of the transaction.



HMRC has devised an online Employment Status Indicator Tool to help work out whether someone is genuinely self-employed or employed (HMRC does not recognise “worker” status — see page 30). Here is the link: www.tax.service.gov.uk/check-employment-status-for-tax.
 


Another body that plays a key role combating false self-employment is the Gangmasters and Labour Abuse Authority (GLAA). See page 28, Chapter 1 and visit the GLAA website at www.gla.gov.uk.




In April 2014, HMRC changed the tax laws in response to the growing use of false self-employment by intermediary labour supply businesses, such as payroll companies and employment businesses. As a result, PAYE and National Insurance contributions (NICs) must now be deducted at source from the wages of anyone who is supplied to a hirer by an intermediary unless that intermediary can demonstrate to HMRC that the individual is genuinely self-employed. 


In other words, anyone supplied by an intermediary to work for a hirer must be taxed as an employed earner unless the intermediary can clearly show that the person is genuinely running their own business. 


Opportunities to claim tax relief on travel and subsistence expenses have also been restricted, as these were being abused in order to avoid NICs. 



Quarterly reports must be made to HMRC of any worker whose pay is not having tax and NICs deducted, with an explanation as to why this is.