To be or not to be self-employed

Sarah Buxton explains the processes that HMRC uses to determine employment status and discusses if it's worth being self-employed.

Sarah Buxton explains the processes that HMRC uses to determine employment status and discusses if it is worth being self-employed.

Practice owners are currently being bombarded with queries from team members about whether they are or should remain self-employed. Once again, the dental industry is considering this point and there is a lot of confusion about what is happening.

Practice owners need to look at a worker that is not paid through the payroll and their position from a tax perspective, the same as any other business. It is not the contract that is important but the actual reality of the relationship. HMRC will be looking at individual cases on a case-by-case basis.

Case by case

HMRC has tried to people determine whether someone is employed or self-employed for tax purposes by completing the CEST (Check Employment Status for Tax) test. This can be completed by both the team member and the practice owner

What you input onto the online test appears to be of the utmost importance. This tool isn’t the determining factor and care should be taken when answering the questions on this tool.

There are two elements to employment status. Firstly the tax perspective, defined by being employed or self-employed. Secondly, the employment legislation perspective, defined by three types of employment status – employee, worker and self-employed.

Both the tax and the employment tribunal look at similar indicators of where people fit and it’s usually a judge who will make a decision based on the merits of each and every individual case. This is why HMRC have changed their guidance – every case will be looked at based on its merits rather than having a blanket approach.

Contract versus reality

In both employment and tax cases, it’s not the role of the individual that’s important when it comes to defining status. It’s the relationship between the practice owner and the team member that will come under scrutiny.

There’s no point in having a contract with several self-employed indicators if you don’t follow these terms in practice because, in both cases, they will look beyond the contract and at what’s happening in practice to determine the employment status.

For example, a key indicator of self-employed status is the ability to substitute. An employee cannot send someone else in to do their role, a self-employed person should be able to do so.

This is why the locum clause is of vital importance.

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