Self-employed Status
The worker is often remunerated by payment of dividends from the service company and the end user pays the service company for the service provided. Under the provisions of IR35, a worker ‘is deemed to be employed’ where the engagement is for a period of one month or more, and the contract requires the worker to work: • where the client requests • for an agreed number of hours per week • at an agreed rate of pay and where the worker must: • keep a time sheet checked by the client • be subject to the direction of the client • is unable to perform work for anyone else, and • must not sub-contract their work to anyone else. An individual working for an engager under such terms would be treated as employed (and not self-employed) for tax and NICs purposes only, and this distinction establishes that a worker under such circumstance would have a payer with responsibility for administering a full PAYE scheme but will not have the benefit of employment terms. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS From 6th April 2016 HMRC moved to restrict tax relief for the self-employed by removing travel and subsistence relief where the engager has the right to apply too great a level of supervision, direction and control (SDC). Whilst no definition was given for what too great a level of SDC meant it is clear that only those contractors who truly trade their specialist skills and have freedom in respect of the manner in which they deliver that service would retain their relief. From 6th April 2017 most self-employed workers who perform services personally for a public sector body have had PAYE applied to their invoices. A new self-employed test was introduced (see https://www.gov.uk/guidance/check-employment-status-for-tax (CEST)) in order that public sector bodies could determine quickly which tax regime to apply to particular worker. Whilst this has been a difficult regime to apply to the self-employed, HMRC have since determined that the change has had such positive results that they indicated a wish to extend the off-payroll working rules to all external contracting. In the budget of Autumn 2017, the start point for the Finance Act of 2018, the Chancellor of the Exchequer indicated that the Government intended to take a more cautious approach and a full consultation exercise will take place first and a decision taken on private sector contracting later in 2018 with a view to making any legislative changes for April 2019. Budget 2018, for the Finance Act 2019, confirmed that off-payroll working would extend to the private sector, but be delayed until April 2020 to give both sides time to prepare. A full consultation exercise was launched on 5th March 2019. This implementation date was further delayed to 6th April 2021 as a consequence of the Covid-19 restrictions. No printing, copying or reproduction permitted. From 6th April 2021 medium and large private sector businesses, when they engage a worker who works through an intermediary, are responsible for determining the Income Tax and NICs status of any payments made for work done. As with the public sector, the engager must make an individual determination of the status of the contract based on the normal rules for determination. Following several, high profile, status cases during 2019 HMRC has been revising the status determination tool, CEST. Following a determination the worker has the right to lodge an appeal against a determination they disagree with and an appeals process has to be in place to deal with it. HMRC can be asked to provide a ruling if the worker disagrees with the appeal decision and further appeals can be made to the courts.
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