Self-employed vs PAYE

Do you understand the difference?

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Self-employment explained


In short, IR35 involves applying three principles to determine employment status . These are known as the principal 'tests of employment':

Control

What degree of control does the client have over what, how, when and where the worker completes the work?

Substitution

Is personal service by the worker required, or can the worker send a substitute in their place?

Mutality of obligation

Mutuality of obligation is a concept where the employer is obliged to offer work, and the worker is obligated to accept it.

Control

What degree of control does the client have over what, how, when and where the worker completes the work?

Substitution

Is personal service by the worker required, or can the worker send a substitute in their place?

Mutality of obligation

Mutuality of obligation is a concept where the employer is obliged to offer work, and the worker is obligated to accept it.

Other factors considered to determine whether you are caught by IR35 include the contract type, whether you are taking a financial risk, if you are 'part and parcel' of the engager's organisation, being in business on your own account and provision of equipment.


All this evidence is taken into account, and if the balance of probabilities is that the worker is an employee then IR35 applies. For example, if a worker has an unfettered right to send a substitute in their place, personal service is not required and IR35 wont apply.

If you engage with contractors under a self-employed basis have you...

  • Provided a contract for every new job that takes place?
  • Undertaken a compliance check on every contractor prior to their start?
  • Have you confirmed their Right to Work for money laundering purposes and eligibility to work in the UK?
  • Verified their Self-Employed Status with the HMRC?
  • Are they working on a price basis?
  • Have they provided Public & Employers Insurance at the required financial levels prior to starting on site e.g. £10m/£10m/£5m?

If the answer is NO to any of these, it is likely to be picked up at a status enquiry from the HMRC. Genius Money provide guidance on how to run a compliant workforce, contact us today to find out more.

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