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Grasping the thorny issue of your work status
2:06pm Friday 23rd September 2011 in Business Clinic
Employment status has always been a contentious issue which has gained much press over the years. However, the status issue remains very much unresolved.
This issue has always been in the sights of Revenue and Customs, given the perceived “loss” of revenue when comparing taxes raised under self-assessment and through the PAYE system.
The Supreme Court has handed down its judgment in Autoclenz v Belcher and Others. This is a significant employment status judgment.
Autoclenz engaged car valeters on a self-employed basis. The contracts did not contain a mutuality of obligations (in that the employer is obliged to provide work for the employee, and the employee is obliged to accept it).
They did include substitution clauses (in the case of a self-employed worker, this would state that they may provide a substitute and, therefore, do not have to complete the work themselves).
The individuals argued that the clauses did not reflect the actual agreement between the parties and that they were obliged to provide the services personally.
The court agreed with the individuals and found that the clauses were not a true reflection of the agreement.
More importantly, the Supreme Court held that when assessing the contractual clauses, tribunals should take into account the expectations of the parties (did anyone expect a substitute to be sent?) and the bargaining power between the parties (was the contract a “take-it- or-leave-it” contract?).
The Supreme Court also suggested that the conduct of the parties may be such that it trumps the written terms agreed between the parties.
In essence, the Supreme Court has widened an individual’s scope to claim that the agreed written terms are a sham and dismissed the sanctity of the written contract (which has long been Revenue and Customs’s approach).
The bar has just got a lot higher for contractors engaging self-employed sub-contractors with the risk of employment tribunal claims increasing significantly.
However, it is worth noting that the court’s decision supported a group of individuals who wanted to be classed as employed rather than self-employed. It is usually the case that an individual would be arguing that they are self-employed.
Establishing self-employment or employment status can be notoriously complex, and it is advised that professional advice is sought to establish the position. LB Group would be pleased to help with any status issues.
* LB Group is a firm of chartered accountants, business advisers and chartered tax advisers with offices in Colchester, Chelmsford, Ipswich and London.
This article is designed for the information of the reader and while every effort is made to ensure accuracy, information contained in this article may not be comprehensive and recipients should not act upon it without seeking professional advice.
LB Group is registered to carry out audit work by the Institute of Chartered Accountants in England and Wales.