Who Pays The Self-Employed Tax
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5 March 2013
is well known that farming and equine businesses
are seasonal and have high fluctuations in volumes of work. Such
have relied heavily on genuine self-employed subcontractors. However, a
tribunal case Yetis has shown the
need to check that such workers are genuinely recorded as self-employed
paying over their own tax as otherwise the tax will be payable by
v Commissioners for HMRC & Style Superior Windows (TC02410)
is an example of a worker who was willing to be self-employed
until the tax was due, but who then claimed to have been an employee
eventually, found by the First Tier Tribunal to have been employed.
is this ability to “claim to be an employee” which
is a worry.
for three old years were discharged
because Mr Yetis was found never to have been self-employed, meaning
‘employer’ should have accounted for PAYE and NICs. A lack of
not help matters, but Mr Yetis was aware that he, like other salesman
by Style, was not treated as an employee and had apparently assured the
that his tax was up to date.
key factor is for businesses using the services of
a subcontractor to obtain copy documentation proving
not just the
self-employed status but that the tax has been paid.
tribunal judge (Mr Sinfield) considered all the
key principles that have developed in the employment status field over
and followed the approach seen in Market
Investigations Ltd v Minister of Social Security (1969) 2QB173
at whether the individual was in business on their own account.
company confirmed in evidence that the taxpayer
was obliged to provide personal service at all times, no substitutes
been permitted, and he could not reasonably have worked anywhere but at
location specified by the company at the same time.
business taking on the workers should also assess
the status of employed or subcontract. They should understand if the
role is really
employed or self-employed and embrace their duty in this regard. The
of having to pay all the relevant PAYE and NIC serves as a very good
to fulfil obligations, eg ensuring there is a “substitute” clause etc.
Yetis had no capital invested in the business, he
could not make a loss and was paid £200 per week even if he did not
any sales that led to commission payments. The fact that the working
arrangement is amicable does not mean the subcontractor is honouring
of the arrangement.
discussing the legal principles, Mr Sinfield
confirmed that no one test can determine every case and that the ‘in
on your own account’ test is more relevant than control. Needless to
does not sit overly well with cases such as JL
Windows and Door Services and Molloy v Commissioners for HMRC SpC733,
and Echo Publications Ltd v Ernest Tanton (1999) IRLR367 and Montgomery
Johnson Underwood Ltd (2001) IRLR269 which were
predominately decided on
specific “tests” such as control and personal service.
case demonstrates that the courts can still be
somewhat unpredictable in their approach and the weight they will give
use of subcontractors can be beneficial for small
businesses but it must comply with all the various rules on both
of the transaction, and nothing must be taken for granted.
About the Author
Supplied by Julie
F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire,
Tel: 01962 735544. Email; firstname.lastname@example.org,
the author of Tax Planning for Farm and Land Diversification (Bloomsbury Professional), Equine
ISBN: 0406966540, and Stanley: Taxation
of Farmers and Landowners (LexisNexis).
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Article Published/Sorted/Amended on Scopulus 2013-12-04 09:15:42 in Tax Articles