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The ESI is intended to help determine employment status - whether a worker is an employee or self-employed. It says that 'although it is intended for those who engage workers, it may also be useful for individuals who wish to know what their own employment status is.'
Launched this week, the ESI will only provide an indication of employment status. It will not give a definitive or legally-binding opinion.
Not IR35
However, in the introductionary page it advices that:
The ESI tool should not be used for determining the status of:
- Office holders (such as company directors and other certain individuals who are appointed to a post);
- Individuals who provide their services through a limited company (known as IR35); or
- Contracts with agencies to provide services to another person (client).
It also provides a general briefing sheet on Employment Status - Employed or Self-Employed? listing a number of factors to be taken into consideration. These include contracts, personal service, mutuality of obligation, right of substitution, right of control, provision of own equipment, financial risk, opportunity to profit, length of engagement, right to terminate a contract, mutual intention and personal factors.
It says: "For tax and NICs purposes, there is no statutory definition of a contract of service or of a contract for services. What the parties call their relationship, or what they consider it to be, is not conclusive. It is the reality of the relationship that matters."
Number of factors
The overview concludes: "Whether a worker is an employee or self-employed depends on a range of factors, but the final opinion is not reached by adding up the number of factors pointing towards employment and comparing that result with the number pointing towards self-employment. The courts have specifically rejected that approach.
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"When the detailed facts have been established, the right approach is to stand back and look at the picture as a whole, to see if the overall effect is that of a person working in a self-employed capacity or a person working as an employee in somebody else's business. If the evidence is evenly balanced, the intention of the parties may then decide the issue."
The ESI is available on the HMRC's website and the briefing document is available here.
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Susie Hughes © Shout99.com 2005
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