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Whenever there is a question
whether a person is employed or self employed, the Inland Revenue will
seek to apply the following tests in order to decide the tax situation:
- 1. Is there a Master / Servant (Employer / Employee) relationship?
- 2. Is the contract a contract ‘For Services’ or a ‘Contract
Of Employment’?
- 3. Does the person have a position within the organisation?
- 4. Is the person entitled to receive sick pay or holiday pay?
- 5. Does the person provide his/her own equipment for the job?
6. Did the charity advertise the job as
an employment or was it advertised as a Tender for a contract?
7. Can the person delegate another to do the job?
8. Is the person paid by the hour or for the job done?
9. Does the person have a Schedule D (Self-Employed) Tax &
National Insurance reference number?
10. Does the person have any other clients, or is this his/her only
client?
11. Who has the financial risk if anything were to go wrong?
12. Is the person supervised or free to decide how to do the job?
13. Was the person employed and became self employed, or vice versa?
I t is beneficial to the Inland
Revenue to classify persons as employed as opposed to self-employed
since the charity (Employer) would have to deduct tax and national
insurance under the PAYE system. The Inland Revenue has powers to review
the situation as far back as 1944 when the PAYE was introduced in order
to re classify persons as employees with all the consequences of
penalties, fines and back taxes.
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