The complications of employment status
The fact that H M Revenue and Customs’ website describes the area known to tax consultants as ‘status disputes’ as ‘employment status’ tells you that the majority of people are employed rather than self-employed. The question of status, however it is referred to, is whether somebody is self-employed or an employee. The penalties for not operating payroll when you should are severe and can amount to several times the amount of tax involved.
The Revenue, or at least their employers the government, would probably prefer everybody be an employee. The reason for the preference for employees is that more tax is paid that way and that tax is paid sooner. It often falls to whoever deals with payroll services in a business to decide whether someone is an employee or not. Sometimes it does not even get as far as payroll services. Often the individual contracting the person concerned does not appreciate they should even be talking to payroll services.
Payroll and employment status is a complex area. It is not clearly set out in legislation and, as a result, there have been many tax cases. However, the results of these cases are generally held to be specific to the particular details they were discussing.
One of the key areas is whether somebody can send a substitute if they are unavailable. If they can, that is an indication they are self-employed. Likewise if the person being contracted supplies their own tools and office supplies this is a strong indication they are self-employed.
If a fixed weekly or monthly amount is paid then employment is indicated. Similarly an entitlement to holiday or sick pay is a strong indicator that someone is an employee.
At Dataplan, we take the worry away by operating your payroll services for you. We can also advise on the status of people you are intending to contract.
The Article is written by dataplanpayroll.co.uk providing Payroll services and Payroll outsourcing Services. Visit http://www.dataplanpayroll.co.uk for more information on dataplanpayroll.co.uk Products & Services .