Are you employed or self employed....?

In most instances, the answer to the above question is quite clear, however there are some instances where the lines between employment and self employment are blurred.

This could mean that someone who is truly an employee pays their tax as self employed. This in turn means that the “employer” hasn’t paid enough national insurance and the employee has probably claimed expenses against their income to which they would not be entitled to claim if they were an employee, meaning that they have not paid enough tax.

If someone is truly self employed but treated as an employee, then the reverse is possible – they may have paid too much tax and the “employer” has paid too much national insurance.

To assist both businesses and workers to determine their status, HM Revenue & Customs (HMRC) have an online test – known as the employment status indicator (ESI) – which asks relevant questions to the arrangements and will give a decision based on the answers received. If you are the “employer” then the decision can be relied upon but if you are the worker, the decision is only indicative, which is still helpful.

Of course, the decision depends upon the answers received and if HMRC believe that some answers are not a fair representation of the arrangements, they may challenge the decision.

The link for the ESI can be found at - https://www.gov.uk/employment-status-indicator

As ever, if you need advice on a worker’s status, or indeed your own status, please call your designated office for further assistance.