The following Employment Tax guidance note Produced by Tolley and written by Anne Redston. Anne is a barrister at Temple Tax Chambers and is not authorised to write on behalf of the Tribunals Service or the judiciary. provides comprehensive and up to date tax information covering:
This note explains how to work out whether a person is employed or self-employed. It considers the NIC deeming rules, the contractual relationship between the parties, HMRC’s Check Employment Status for Tax (‘CEST’) online tool and the HMRC status determinations, together with how these can be challenged. The reasons why status is important are explained in the Employment status ― why it matters guidance note.
Remember that this note, and the other notes on employment status, are only a summary, and you may need to take further advice. For the position where individuals are working through personal service companies, see the Personal service companies overview guidance note.
In July 2017, the Taylor Review recommended several significant changes to the current legal position. This Review, and the subsequent developments, are briefly discussed in the Employment status ― why it matters guidance note.
For tax purposes, the question of whether a person is employed or self-employed is established by the contract between the individual and his engager, together with the case law which has built up from interpreting such contracts. The position is usually the same for NIC, unless certain deeming rules apply. These are discussed at the end of this note.
Sometimes the contract between the engager and the individual will be written, sometimes oral, and sometimes part-oral, part-written. It is naturally more difficult to establish the terms of an oral contract, and it is therefore advised that individuals formalise their relationship with their engagers in writing. Of course, the contract will be effective for all purposes and not just for tax and NIC, so appropriate legal advice should also be taken.
The status tests and the underlying case law are of primary importance. These are summarised in the Employment status tests guidance note. In particular, care is needed when defining the extent of any control over the individual by the engager, whether there is a right of substitution, the evidencing of any financial risk or opportunity for profit,
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