With HMRC on a mission to maximise tax revenue, they’re actively carrying out compliance reviews into those companies that engage self-employed individuals to ascertain if those individuals should be treated as employees.
If they are of the view that your self-employed individuals should be retained on an employed basis, you could face a substantial liability. A compliance review begins with HMRC asking you, the owner or director, about the way in which individuals work so they can build a picture about working relationships.
They may make their opinion quickly – deciding that the individual is in fact an employee – or they may ask for more information.
They will want to speak to various individuals to see whether there are any inconsistencies between what the company’s understanding of the relationship is compared to the individuals’.
Here at RIFT Legal, we also know that HMRC should take into account any contracts for services or other supporting documentation which addresses the working relationship.
The HMRC caseworker may dismiss this, citing that what happens in practice is more important than the paperwork. However, if both parties genuinely intended for the contract to be a binding agreement that sets their rights and obligations, HMRC cannot simply cast this to one side.
It often happens that the HMRC case worker will refer a file to an HMRC Employment Status Inspector for a final opinion. Even in these cases, Status Inspectors are not necessarily always right and it is imperative to get independent expert advice.
Do not forget that one of HMRC’s main objectives is to maximise revenue.
Even when HMRC reach an opinion, you can dispute this and continue to argue your case until they raise formal assessments confirming how much you will have to pay, including penalties and interest.
At this point, you will have to either pay HMRC or appeal the case and list it for a tribunal hearing at the tax tribunals.
As this is a complex area, there are a lot of myths and misconceptions about employment status that demand expert insight.
RIFT Legal can give the expert advice essential to ensuring you are operating within the parameters of employment status – perhaps avoiding a costly change in how you engage people and any HMRC challenges of penalties.
We’d be happy to discuss your particular circumstances and give the advice most suited to your business ambitions.