Employment status is not as simple as it may first appear. Determining wrongly whether someone is employed or self employed can be a very expensive tax mistake.
Frequently there is no clear-cut answer for determining employment status. The fundamental factors to consider:
- Control – Who Has The Final Say In How The Business Is Run?
- Integration – Who Is Providing The Equipment And A Management Role
- Mutuality Of Obligation – When Is Work Offered, And Can Work Be Turned Down?
- Economic Reality – Who Is Responsible For Meeting Losses And Profits?
The Importance of Getting It Right
Apart from being legal requirements under employment law – which govern an employee’s statutory rights and benefits – employment status can also have large impacts on tax and National Insurance contributions. Businesses who use the services of self-employed individuals without properly determining their status could potentially be amassing large tax and National Insurance problems for themselves in the future, not to mention tax tribunals, court dates, and appeals that could cost your business time and money.
RP Accountants can help navigate your business over the employment status hurdles and ensure you are not at risk of having to pay penalties or unexpected, avoidable tax contributions. We will review working arrangements, and help prepare or give advice on proposed contracts with self-employed individuals to ensure IR35 compliance and ensure a more secure working relationship.
Having a professional accountant review the current and proposed employment status of your employees and contractors can give you peace of mind now, and save you a potential headache in the future.