IR35 Employment Status: Contractor Or Employee?
Have you completed your CEST assessment yet?
POSTED BY HELEN BEAUMONT ON 20/11/2019 @ 8:00AM
The Check Employment Status for Tax (CEST) assessment is designed to determine if you are truly self-employed or not. My blog post this week gives some of the details behind that test ...
Employee or contractor? HMRC want to know your IR35 employement status!
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Contractors, freelancers or temporary workers ... whatever you consider yourself, your employment status needs to be determined before April 2020. But what criteria are used to determine the result?
Here are the main factors:
If a client controls when, where and how you perform the tasks they assign to you, it suggests that you as a contractor do not provide any sort of specialist service and could be classed as an employee. You will need to demonstrate your autonomy in the way you work, to show that your client has no influence over the way you work and that needs to be shown in the way you complete the assigned projects and the contract you have with your client.
If your client can easily substitute another person to complete the tasks they have assigned you, then you may run into IR35 difficulties. This shows you're simply a team member and HMRC could easily class you as an employee in this case. Your IR35 friendly contract must include a substitution clause.
Mutuality of Obligation (MOO)
This applies when your client expects you to complete work when asked to do so, and you have an expectation of constant, regular work with them. If both these criteria apply between you and your client then you could be classed as an employee. If you were self-employed, you would expect to be hired for a specific task with no expectation of further work after completion.
An employee would rarely experience any financial loss from being employed. All the tools of the trade and personal protective clothing are supplied, your payroll is processed regularly and you have holiday and sick pay when needed. A contractor has to provide everything themselves and has no legal rights to any payments should they choose not to work or are ill and cannot complete the tasks the client assigns to them.
Of course, there are other factors to consider but the points I've outlined above are the heart of the matter. Other things to look at include:
Are you paid hourly, daily or per project?
Do you have access to benefits, facilities or events offered by the client?
Do you only work for one client or do you have many on the go at the same time?
Do you have a fixed notice period on completion of a project?
As my contractor tax clients have discovered, HMRC is really interested in getting as many CEST assessments completed as they can in the run-up to the changes in April 2020.
Would HMRC class you as an employee following the test?
Until next time ...
Would you like to know more?
If you're worried about your IR35 employment status or have been asked to complete a CEST assessment and need some advice,call me on 01908 774323, leave a comment below or click here to ping over an email and let's see how I can help you.
About Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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