HMRC publishes Employment status factsheet

14 February 2020

HMRC has published an Employment status factsheet, which has been designed with the aim of assisting individuals in assessing whether their employment status is correct or not.

The publication advises that employment status is the term used by HMRC to establish whether someone is classed as being either employed or self-employed. It confirms that employment status can affect an individual’s entitlement to benefits and equally, their employment rights.

The factsheet states that employment status is “not a matter of choice” and is based on the terms and conditions of the agreement individuals have with whoever they work for, but that the responsibility is on the engager to ensure that it is right.

In terms of employment status and the law, the factsheet comments that the law for tax, National Insurance (NI) and Value Added Tax (VAT) does not define employment or self-employment. Employment status is mainly influenced by the principles established by the courts, commonly referred to as case law. There are, however, special rules that apply to certain occupations and scenarios, and do not follow the principles of case law, such as:

  • Where work is arranged through an agency
  • Where somebody is a company director
  • Where somebody is the secretary of a club or holds any other office in relation to their earnings from that office
  • For office cleaners
  • For ministers of religion
  • For examiners, moderators or invigilators of an examining board
  • For deep sea divers
  • Where somebody carries out work for a relative
  • Where somebody is a non-permanent, casual or freelance worker of a specified grade in the film or TV industry

Where individuals provide their services through a company or partnership, then they will need to be well informed about the Intermediaries Legislation and Managed Service Company Legislation so that they can determine which one is applicable to them.

 The factsheet advises that in most situations, employment status is simple, and that generally, you’re:

  • Employed, when you work for someone and do not have the associated risks of running the business
  • Self-employed, when you’re in business for yourself and are responsible for the subsequent success or failure of that business

The sheet then provides a series of questions that, where the answer is yes, individuals are likely to be classed as being employed and a further set of questions that, where the answer is yes, individuals are more likely self-employed. For scenarios where individuals want further information and the questions given don’t apply to their situation, it is advised that they use the Check Employment Status for Tax (CEST) tool.

There is a reminder that, for those who work more than one job, they could be simultaneously employed and self-employed, where they are an employee in one job but are self-employed in another.

HMRC reiterates how important the correct determination of employment status is as it ultimately affects the tax and NI that individuals pay, and how it is paid. Employment rights are also directly impacted by employment status, so it is imperative to get it right.


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