Tests for self employment

 

Your responsibility

It is the responsibility of the person who employs a worker to determine if they are self employed or should be an employee. Therefore, even if somebody tells you that they are self employed it does not necessarily mean that you should treat them as self employed for the work they do for you. A person's employment status depends on the terms of the contract between you:

  • a contract of service usually makes them an employee
  • a contract for services usually makes them self employed

A person can be employed and self employed at the same time, perhaps by working for an employer during the day and running their own business in the evenings. If you get their employment status wrong you might have to pay extra tax, National Insurance Contributions (NICs), interest and a penalty.

Indications that a worker is your employee

An individual is likely to be employed by you if most of the following statements apply to them:

  • you can tell them what work to do, as well as how, where and when to do it
  • they have to do their work themselves
  • you can move the worker from task to task
  • they are contracted to work a set number of hours
  • they get a regular wage or salary, even if there is no work available
  • they have benefits such as paid leave or a pension as part of their contract
  • you pay them overtime pay or bonus payments
  • they manage anyone else who works for you

Indications that a worker is self employed

If any of these statements applies, your worker is likely to be self employed:

  • they can hire someone else to do the work you've given them, or take on helpers at their own expense
  • they can decide what work is done and when, where, or how it is done
  • you pay them an agreed fixed price and it doesn't depend on how long the job takes to finish
  • they can make a loss or a profit

Even if none of the statements in the previous list applies, your worker is still likely to be self employed if most of the following apply to them:

  • they use their own money to buy business assets and pay for running costs
  • they are responsible for putting right any unsatisfactory work, at their own expense and in their own time
  • they provide significant tools and equipment that are fundamental for their work

Different rules for certain types of worker

For some categories of worker, there are different rules from the usual employment status ones for working out how tax and NICs should be deducted from their earnings. Contact us or HMRC Status Customer Service Team for guidance if you need more information about tax and NICs for any of the following:

  • agency workers
  • company directors and other 'office holders' such as liquidators, administrators, auditors and receivers
  • cleaners
  • workers who supply their services through an intermediary - the rules are sometimes referred to as IR35
  • workers who supply their services through a managed service company
  • a number of other occupations, including divers, some teachers and lecturers, examiners, moderators, invigilators, entertainers, returning officers and counting officers
  • if your spouse works for you
  • if a relative works for you in your private residence (for example, as a gardener, carer, cook, etc)

Online tool and further guidance

You can also use HMRC's online Employment Status Indicator interactive tool to determine the correct status, or you can request a written opinion by contacting HMRC's Status Customer Service Team.

> Employment Status Indicator tool

> Status Customer Service Team

 

Disclaimer

This information is not meant as a substitute for professional advice and by no means covers every scenario. Almost every rule described here will be subject to many exceptions and caveats. Tax legislation is extremely complex and can be difficult to understand. You should discuss your circumstances with a qualified professional before acting on any information contained within this website. Tax legislation is constantly changing and the information contained within this website is written from our current understanding and interpretation of the tax system as of 6 April 2018.

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