Regulation Matters January 2020

10 | Regulation Matters - January 2020

IR35 – Off Payroll Working April 2020 and potential impact for advisory firms (continued)

‘Part and parcel’ of the organisation If an individual is ‘part and parcel’ of a firm’s organisation, they are more likely to be an employee. The HMRC guidance gives the example of someone taken on to manage a firm’s staff, who would normally be seen as an integral part of the firm’s organisation with the result that this would be seen as a strong If an individual is entitled to benefits such as paid l eave, membership of firm’s pension scheme, right to car park space and canteen facilities, this will be a good indicator that an employment relationship exists. A contract of employment may also contain access to a grievance procedure and the worker may be subject to disciplinary procedures. However, the absence of such benefits will not be determinative − in particular, it may simply reflect the intention of the parties that the individual be self-employed. Right to terminate contract A right to terminate an engagement for a reason other than serious breach, by giving notice of a specified length, may be viewed as indicative of a contract of employment. However, this would (in the view of HMRC) only be a minor factor. Personal factors The HMRC guidance also indicates that it may sometimes be necessary to take into account factors which are personal to the worker. The guidance gives the example of a skilled worker who works for a number of firms throughout the year and has a business-like approach to obtaining engagements. It says that this will point towards self-employment. However, the guidance also states that personal factors will usually carry less weight in the case of indicator of employment. Employee-type benefits

Financial risk Individuals who risk their own money (for example, incurring significant amounts of expenditure on training in order to obtain the skills needed, which are used in subsequent engagements) are less likely to be employees. Self-employed workers may also be required to rectify unsatisfactory work in their own time for no additional reward. The risk of making a loss is a very strong indicator of self-employment and can be decisive on its own. Opportunity to profit A person whose profit (or loss) depends on the capacity to reduce overheads and organise work effectively is more likely to be self-employed. People who are paid by the job (rather than on an hourly or day rate, for example) will often be in this position. Length of engagement The length of an engagement is unlikely to be determinative in itself with regard to an individual’s employment status. However, it should be noted that it is more likely that an employee will have an open- ended contract.

an unskilled worker. Mutual intention

The intention of both parties can be decisive where the factors pointing to employment and to self-employment are evenly balanced. However, a stated intention (for example that an individual is not an employee) will not, without more, be determinative.

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