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Employment status and independent contractors

Posted on 27th July 2012
Case law

Businesses that contract with self-employed consultants will welcome a decision from the First-tier Tax Tribunal.

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Simon Quantrill Simon
Quantrill
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The fact that there was no written contract between the parties pointed to an ad hoc relationship

The tribunal upheld an appeal by a company against a determination for PAYE and a notice for NICs for a self-employed engineer. After ending a five-year self-employment relationship with the company, the engineer attempted (at the suggestion of his tax advisers) to claim back the tax that he had paid on a self-employed basis on the ground that the company should have taxed him as an employee! The fact that there was no written contract between the parties pointed to an ad hoc relationship and the tribunal found no evidence that the engineer had challenged the arrangement while it was on-going. The judgment may prove useful for businesses when mounting a defence against similar claims.

Our checklist on employment status explains the significance of the distinction between an employee, a worker and a self-employed contractor. It also sets out the factors that will be considered by an employment tribunal when deciding whether an individual is an employee or self-employed. Please remember, however, that each case will depend on the specific facts and the tribunal will need to come to its decision balancing any conflicting factors.

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