Disproving 'false self-employment' remains an enigma

The government has published new HM Revenue & Customs guidance on the contentious ‘false-self-employment’ provisions that came into force on April 6th 2014, writes Ben Grover, senior legal consultant at recruitment law firm Lawspeed.

This is in addition to the guidance already available within the HMRC Employment Status Manual. Affected parties should note that either set of guidance is not the law and it is the legislation itself that would be applied by a tribunal.

Contrary to some reports, Lawspeed does not regard the guidance as changing or broadening the legislation itself. The guidance actually confirms the type of information that agencies will be expected to collect and provide to HMRC.

What is conspicuous by its absence is any indication of how an agency will be able to report or evidence the absence of supervision, direction or control (a defence to the application of the legislation). We regard this as being a near impossible exercise, except in very specific circumstances. By not having addressed this, the question is begged -- has HMRC simply missed an opportunity or perhaps intentionally missed the mark?

Evidencing the absence of anything (save perhaps morals!) would always be a challenge. In this way the Treasury has introduced a test with conditions that will apply to almost every supply arrangement including supplies of limited company contractors who will potentially be caught. Although there is separate guidance provided by HMRC at the time of the consultation which explains why limited company contractors should not be caught by the tests, it is the case that Sections 44-47 (of ITEPA) will remain in the HMRC armoury should it ever decide that an IR35 investigation is too costly or complicated, with the agency which has the contract with the hirer for the individual’ services liable for any deemed unpaid employment taxes. As such everyone should beware!

Editor’s Note: Further Reading –

Why you may be taxed like an employee, minus their protections

Tribunal tackles ‘control’ in false self-employment

Contractors’ Questions: Who’d be liable for false self-employment?

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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