To be or not to be [Self employed]? That is the question, says Justine Riccomini, employment tax Senior Manager.

A very interesting precedent appears to have been set by the Supreme Court in its recent judgement of Autoclenz v Belcher and Others. Clients will know that to take on self employed workers in any business who do not operate through a limited company can pose a risk of HMRC attack.

There are certain key criteria which any business must consider before deciding to engage self employed workers, such as how independent the workers are, who they report to, whether they are in integral part of the core business function etc. Only when an individual can be said to be truly in business on his own account can the engager be certain he is self employed.

In the Autoclenz case, it was not the company or indeed HMRC who said that the individuals were employees – but the workers themselves. They stated that the clauses in their written contracts for services, which contained 'substitution' and 'mutuality of obligation' clauses (usually key to being self employed) did not reflect the reality of their working arrangements. The Supreme Court agreed with the workers and re-classified them as employees of Autoclenz.

On passing judgement the Supreme Court added that in future, when tribunals are considering employment status cases, they should take into account certain concepts in addition to merely going through the motions of examining the key criteria:

  • The expectations of the parties; 
  • The bargaining power between the parties; 
  • The implied terms of the contractual arrangements – which could be of greater importance than the written ones.

Clients should be aware of this when engaging self employed workers and consider that the written terms on a stand-alone basis are no longer to be considered sacrosanct.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.