Whether an individual is an employee or not in a particular situation is a question of fact depending on the terms on which he works. The question of whether an individual is employed or self-employed is very important for the business “employing” him or her, as that business has to comply with the reporting requirements. The “employer” should not just accept that the worker says he is “self-employed”.

In certain areas HMRC has placed emphasis on reclassifying individuals claiming to be self-employed and has issued leaflet IR56 entitled “Tax: employed or self-employed”. The booklet sets out the questions that should be answered to determine the problem. If you have treated someone as self-employed and subsequently after a routine visit from HMRC it is clear that they were employees, then the tax and NIC which should have been paid will be assessed on the employer. Therefore, it is important to ensure when using the services of self-employed people that they are in fact self-employed. If doubt exists as to the status of an individual, the situation can be clarified with HMRC. HMRC provide an interactive software tool to help employers and workers at: https://www.gov.uk/employment-status-indicator