Are your contractors really employees in disguise?
Your accountant may already have informed you that HMRC has announced it is to form a specialist team to examine working practices at organisations that use freelance staff to fill what amount to full-time roles.
So how will this affect you?
Employers who use office-based freelance workers to cover what would otherwise be full-time positions avoid offering individuals any of the associated benefits of full-time employment, such as sick pay, pensions and maternity leave, as well as avoiding employer national insurance contributions (NICs) are likely to be of interest to HMRC.
Any organisation found to be in breach of existing laws, could be fined up to 100 per cent of the tax owed.
The crackdown comes at a time when HMRC is taking a renewed interest in the use of ‘umbrella companies’ to pay staff, and other unusual working arrangements that avoid the payment of NICs and other taxes.
Some people think that they can simply choose what employment relationship they want with the company they’re working for rather than it be determined by the facts of the situation. Indeed I had a conversation with one business owner who had an issue with someone they described to me as, “a self-employed employee.” Clearly that is a contradiction in terms. Whether someone is an employee or not depends on several factors including mutuality of obligation; right of substitution; provision of business tools; degree of control; and whether the worker has a degree of financial risk etc. It is a complex area, but generally, if it looks like and employee and smells like an employee – it probably is one!
If you have staff and are concerned about their employment status, please get in touch for advice.
Posted on 24 Oct 2016