News added on 17.10.2014

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Employment status

HMRC loses employment status case

A tax tribunal recently considered whether a driver was an employee of the client he worked for. What was the outcome?

The case. EMS (Independent Accident Management Services) Ltd (EMS) was a firm involved in the recovery of damaged motor vehicles on behalf of insurance companies. Mr Makings (M) ran a sole trade business (DKM Services) and was contracted by EMS as a driver. HMRC said that M was an employee of EMS, which ought to deduct PAYE and NI from any payments to him. EMS claimed that M was an independent contractor so he was responsible for any tax and NI due on his income.

Tribunal decision. The tribunal decided that M was self-employed as EMS had no right to control how M carried out his job after having agreed what needed to be done - EMS left M to undertake the job as he saw fit. Financial risk was also considered to be a relevant factor - M had purchased his own van and trailer, had to arrange his own insurance and did not receive holiday pay, sick pay or other benefits such as a pension from EMS. M also had the very real risk that his invoices may not be paid as he invoiced in arrears.

Tip. This case demonstrates that HMRC is trying to argue that a worker is an employee when the facts clearly indicate the opposite. If faced with a similar challenge from HMRC, it might be worth reminding it of the outcome in this case.

The tribunal ruled that the driver was self-employed as his client had no right to control how he carried out his job and he bore significant financial risk. Use the facts of this case to back up any challenge to employment status.

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