Employed or Self Employed?

Not necessarily. The length of time that a subcontractor is engaged is not in itself a determination as to their employment status. However, a lengthy spell could indicate that a contract may not be one of self-employment but that of employment. Employment status is not a matter of choice. You or the subcontractor cannot simply decide to treat your working arrangements as either self-employment or employment. The circumstances of the engagement determine how it is treated.

People are self-employed if they are in business on their own account and bear the responsibility for their business's success or failure. There are a number of pointers which would indicate whether or not your worker is self-employed and these can be found on the HMRC website www.hmrc.gov.uk . A useful tool is also available which enables contractors to determine whether or not workers are self-employed or employed.

If the contract points towards an employment arrangement you must operate the correct PAYE Income Tax and National Insurance deductions through the payroll. If it is is self employed, you must ensure he is registered under the CIS scheme, and you need to advise the HMRC.

Date published 5 Dec 2012

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.