STATUS DISPUTES - SELF EMPLOYED V EMPLOYED & IR35

The question as to whether someone is employed or self employed is not as straightforward as it might at first appear. Many people assume they are free to choose, but this is not the case.

Although there is no clear-cut answer as to how you decide if you are self-employed or not, the Inland Revenue has published a leaflet (IR56 Employed or Self Employed?), which sets out a series of questions to test the particular circumstances of any working relationship. These cover areas such as:

• Ultimate control of the work
• Profit element, and risk of loss
• Provision of materials and equipment
• Integration with the employer's business
• The intention between the parties
• Usual conditions in the industry

Note, however, these are often matters of general employment law, and not specific tax legislation. There is an enormous amount of Case Law in this area and the Revenue are not always right. The Revenue do not have the final say on whether somebody is self-employed or not. We can argue your case and take it before the Tax Commissioners for you.

The cost if you get it wrong is enormous. Not only is there the question of employees and employers national insurance, being classified as an employee also gives rise to all sorts of employment rights such as holiday pay, maternity pay, unfair dismissal etc. The decision has to be made by the employer and if you get it wrong it is going to be very hard to recover the back tax, interest, penalties etc from the worker.

We are happy to review your existing arrangements and give you are opinion on whether it will stand up to attack from the Revenue. We can help draft contracts for services to assist you and advise on how you can maximise your chances.

Click here for access to an article on reclassification of subcontractors in the building industry, which is also generally applicable to all status cases.

Many of the arguments regarding self-employment and employment are similar, although by no means identical if you are providing services through a personal service company caught by IR35. Again we can assist you greatly in this area with reviews, draft contracts, arguing your case with the Revenue and if necessary before the Tax Commissioners.