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Employment Status Enquiry

Overview of Employment Status and Self-Employment

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Please see below, as there are many benefits and disadvantages of being self employed.

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Benefits and Drawbacks of Self-Employment

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For Employers:

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  • Advantages:

    • No need to pay Employers National Insurance Contributions.

    • No obligation for holiday pay, sickness pay, or other benefits.

    • Flexibility to hire when needed without commitment to continuous employment.

  • Disadvantages:

    • The self-employed person may not always be available for work when needed.

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For Self-Employed Individuals:

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  • Advantages:

    • Potentially higher earnings compared to being an employee.

    • Delayed tax payments.

    • Ability to claim more expenses against income.

    • Freedom to seek work from multiple sources.

  • Disadvantages:

    • No pay when sick or during days off.

    • Need for public liability insurance.

    • Requirement to maintain detailed records and manage tax returns.

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Some Common Industries for Self-Employment

  • Construction Industry

  • Information Technology

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Determining Employment Status

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Factors and Legal Considerations:

  • Employment status is not solely based on mutual agreement; it is determined by the actual nature of the working relationship.

  • HMRC may disregard contractual terms if the practical relationship indicates an employer-employee relationship.

  • Several court decisions guide employment status determination, but individual circumstances can vary widely.

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HMRC’s Preference and Compliance Checks

  • HMRC generally prefers individuals to be employees due to the streamlined tax and NIC collection under PAYE.

  • During tax investigations, particularly PAYE investigations, HMRC scrutinizes whether individuals treated as self-employed should be employees.

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How We Can Help

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  1. Expertise in Employment Status Reviews

  2. Determining the correct employment status involves evaluating numerous factors without a single decisive criterion.

  3. Incorrect treatment of self-employed individuals as employees can result in substantial back taxes and NIC liabilities.

  4. Representation and Negotiation

  5. Our specialist tax team, experienced in handling HMRC’s Status Inspectors, can:

  6. Conduct thorough reviews of your business’s employment arrangements.

  7. Present well-founded counter-arguments where appropriate.

  8. Negotiate with HMRC to establish the correct employment status of individuals.

  9. Minimize potential tax liabilities and penalties.

  10. Proactive and Reactive Support

  11. If you want to proactively review the employment status of individuals or if HMRC has already raised challenges, here are our Tax offers:

  12. Free, confidential, no-obligation discussions.

  13. An initial free-of-charge meeting for prospective clients.

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If HMRC is challenging your treatment of self-employed individuals or you wish to review the employment status of individuals engaged by your business, contact us for expert assistance and representation.

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