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Employment Status, IR35 & Related Issues
You need to know whether you are employed, self-employed or a worker as your employment status affects the level of tax that you will need to pay as well as any employment rights you may have including whether you can bring a tribunal claim against the company for which you work.
Many employment rights apply only to employees, for example, the right not to be unfairly dismissed, the right to a statutory redundancy payment, statutory maternity, paternity or adoption pay, statutory sick pay and the right to written particulars of employment and payslips. Some employment rights, such as the right to paid holidays, rest periods and the national minimum wage are also afforded to workers. Workers include any individual who works under a contract of employment or some other type of contract but is not self-employed. It includes casual or freelance workers.
Very few rights apply to the genuinely self-employed. Their main right being the right not to be discriminated against due to any protected characteristics (that is, sex, sexual orientation, race, disability, religion or belief, age, gender reassignment, marriage and civil partnership, pregnancy and maternity). This right also applies to workers and employees.
Just because you have a contract that describes you as an ’employee’ or as ‘self-employed’ does not mean that it is the case. Your employment status depends on how the relationship works in practice. There are various factors that need to be taken into account including whether there is mutuality of obligation, the degree of integration into the business, whether you are risking your own money in the business and whether you have to provide the services personally. This is a non-exhaustive list.
It is possible for the Employment Tribunal and HM Revenue and Customs to come to different views about your employment status.
If you provide your services through an intermediary such as your own service company, you need to be aware of the IR35 legislation. It means that, if you would be an employee were it not for the intermediary, you will be liable for tax in line with that payable by employees. You will also be regarded as an employee of the engager for national insurance purposes.
There is a special tax regime for contractors and self-employed sub-contractors in the construction industry. Employees in the construction industry should be dealt with under the normal PAYE system.
We have many years experience in dealing with employment status issues and so we are well placed to advise you on your status and your rights.
Head of Employment & Intellectual Property