Employed or Self Employed?

I have recently seen the workload of my construction business and need to take on someone else to help. Im not sure how long this will last so I have decided to take a subcontractor on for a continuous period of 3 months to cover this period. If this arrangement continues further will I have to make them an employee?

1st March 2009

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.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. 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 information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

Call us today to make an appointment at your local office

0800 0523 555

Or submit an enquiry