Status – employee or self employed
There is a significant difference between the rights of an employed person as opposed to a self employed person, and this is most clearly reflected in their tax treatment. An employee has many more rights such as holidays and maternity leave but at the expense of higher taxes. It is therefore necessary to have an understanding of the differences.
One of the major tests is the degree of control exercised by the employer, while an employee may be told what to do and how to do it on a regular basis and be assessed on how well work is completed, a self employed person may complete the job the way they wish to.
Self employed work on a task or job basis when they quote, complete the work, or invoice at the end of the job whereas an employed person normally works on a process or series of them and is paid on a regular basis whether monthly or weekly.
As the self employed work in their own way, they normally supply the materials and tools to complete the job, whether this is a laptop or concrete mixer. They may also get other people to complete the work, ie they have a right to substitute other people.
Self employed do not have rights to holidays, lunchtimes and do not normally have regular hours like employees.
In the employer/employee relationship there is a mutuality of obligation, on the company to provide work and the employee to accept the work given.
In summary the hallmarks of employment are to provide a personal service, control by the employer and mutuality of obligation in the provision of work. This decision has a significant tax effect and HMRC will use the above tests of employment to try and prove employment wherever possible so it is time well spent in putting together a good defence if there is any doubt.
We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs. Alastair Wood, AW Accounting – Accountants who “speak your language”
