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Finally, some clarity on false self-employment for contractors!

Contractors rejoice – thanks to a recent tribunal, there’s finally some clarity on false self-employment rules and regulations and how they can be avoided.

Since April of this year, contractors have had massive problems making sure they’re complying with new rules banning false self-employment. It’s especially troublesome for any contractor who’s placed in a temporary role through the aid of an agency, as this muddies the waters as to whether the freelancer or contractor is truly a sole trader or if he’s working, for all intents and purposes, as a permanent employee but without complying with the tax burden of professional worker that’s on payroll as an employee.  It’s enough to make you pull your hair out, especially since Her Majesty’s Revenue & Customs have been going at it hammer and tongs to squeeze out any tax avoidance through avenues such as false self-employment.

Well this uncertainty could finally be a thing of the past based on the results of this tribunal. The matter in question revolved around a group of security guards that had been placed through an agency to safeguard several construction sites and whether they truly were contract workers. The tribunal found in favour of the security guards, declaring there was no evidence they were acting as employees – which is of course good news for them – but the real meat of the matter is how the tribunal examined the test for determining if there’s a case of false self-employment or not.

In essence, the vagaries of the ‘supervision, direction or control’ test that HMRC uses to determine if contractors are actually employees was laid bare. In a nutshell, the business that a contractor is performing a service for is treating him like an employee if the firm has a certain level of supervision, direction, or control over his actions whilst at work. The tribunal might not have ruled unequivocally on this one, but they did expound on the ‘control’ element by stating that services being rendered by a contractor that are ‘extraneous’ to the client’s basic activity does not satisfy the control requirement.

If it sounds like a bunch of legal double-speak that’s because it is. Just trust me when I say that it’s good news for contractors, as it makes it harder for HMRC to prove that there was any false self-employment at play. That’s all you need to know in essence!

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