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The new leaflet (ES/FS1) is aimed at helping to make the decision whether or not you are employed or self-employed, an area, according to HMRC, that causes a lot of confusion. It also explains how tax and National Insurance affect you, whatever your employment status.
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It says:"You may choose, or be advised, to provide your services through a company or partnership. If you provide your services in this way then you will need to know whether the Intermediaries legislation (also known as IR35) or Managed Service Company legislation applies."
Making the decision
HMRC says that in most cases your employment status will be straightforward. In general terms, you are employed if you work for someone and don’t have the risks of running the business. You are self-employed if you are in business for yourself and are responsible for the success or failure of that business.
It then provides a series of questions to assist with the determination:
Employed - if you answer yes to most of the questions you are likely to be employed:
- Do you have to do the work yourself?
- Can someone tell you where to work, when to work, how to work or what to do?
- Can someone move you from task to task?
- Do you have to work a set number of hours?
- Are you paid a regular wage or salary?
- Can you get overtime pay or bonus payments?
- Are you responsible for managing anyone else engaged by the person or company that you are working for?
Self-employed - if you answer yes to one or more of the questions you are likely to be self-employed.
- Can you hire someone to do the work, or take on helpers at your own expense?
- Can you decide where to provide the services of the job, when to work, how to work and what to do?
- Can you make a loss as well as a profit?
- Do you agree to do a job for a fixed price regardless of how long the job may take?
If you can’t answer yes to any of the above questions, you are still likely to be self-employed if you can answer yes to most of the following questions.
- Do you risk your own money?
- Do you provide the main items of equipment (not the tools that many employees provide for themselves) needed to do the job?
- Do you regularly work for a number of different people and require business set up in order to do so?
- Do you have to correct unsatisfactory work in your own time and at your own expense?
The leaflet is available on HMRC's website (pdf).
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Susie Hughes © Shout99 2008
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