Employed or self-employed?

Determining employment status

The law for tax and social security legislation does not define ’employment’ and ‘self-employment’. But, over the years, the Courts have considered this issue and their guidance on whether an individual is an employee or self-employed is known as case law.

You or the person you work for, cannot simply choose whether you will be an employee or self-employed. It will depend on the terms, conditions and facts of your engagement.

For example, if you work in the construction industry and possess a CIS4 or CIS6 card that does not mean you are automatically self-employed for each engagement. For more information see leaflet IR148 ‘Are your workers employed or self-employed?’

Broadly, you are

  • self-employed if you are in business on your own account and bear the responsibility for the success or failure of that business, and
  • employed if you personally work under the control of someone and do not run the risks of having a business yourself.

How do I work out my employment status?

The questions regarding tax and National Insurance Contributions should help you and the person you work for decide what your correct employment status is, although they are only a brief guide and don’t cover every situation. It is not possible to list all the factors which may be relevant or provide a precise guide to their relative importance.

For each engagement, you will need to look at the whole picture taking account of the written terms and, if necessary, all the facts relating to what happens in practice. Some of these factors will be more important than others, depending on the particular circumstances.

If you work for a company on a production line in its factory, you are almost certainly an employee. You may also have a written contract of service or you may be a member of a pension scheme open only to employees.

If you are in business on your own account, you are self-employed. For example, if you run your own shop, or are buying and selling goods, or providing services direct to the public from your own office premises.

Usually it will be easy to decide whether you are an employee or self-employed, but there will be times when it will not be so easy. You will need to look at the job as a whole, taking into account all the conditions that you are required to work under. This guide will help you and the person you work for to decide, but it is not possible to cover all scenarios and situations.

Help and advice

If you are unsure, or you have any questions, you need to speak to your local Status Inspector or Status Officer. They are responsible for enquiries and decisions about employment status. You can ask at your local HMRC Enquiry Centre for the name and telephone number of the Status Inspector or Status Officer.

You can find detailed guidance by viewing the HMRC’s Employment Status Manual on their website at www.hmrc.gov.uk/manuals/esmmanual/

Employment law and protection

As well as applying for tax and National Insurance purposes, these considerations may apply in employment law matters such as unfair dismissal and redundancy. Other considerations may also be relevant in these areas, so the position under employment law will not necessarily be the same as under tax and National Insurance law.

For employment protection purposes the employment tribunals, which are independent judicial bodies, will decide whether someone who makes a complaint is an employee or self-employed.

This business advice article is subject to © Crown Copyright
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