Guidance on application of employment status rules to workers using intermediaries


A draft guidance paper was placed on this website on 10 November. Since then, it has been discussed at two meetings with representatives of professional bodies and service company workers. We are grateful for the help of these representative bodies in producing an improved version of the guidance.

The final version is below. It will also be published in the Inland Revenue's Tax Bulletin (Opens new window) on 7 February.

Click here to download the PDF version (35K)

Click here to download the Rich Text Format File (44K)

There are a number of minor changes compared with the original draft, but the main changes of substance are as follows:

Financial risk: we have made it clear that we would take account of a substantial investment in skills, where a skilled worker incurs significant expenditure on training to gain a skill which will be used in subsequent engagements. This kind of investment can be treated as a pointer to self-employment in the same way as investment in tools or equipment.

Contracts involving agencies: the involvement of an agency in obtaining a contract, or in the contractual arrangements for the engagement, does not affect the decision on whether the engagement would have been employment if there had been no service company. This is stated in the first example.

Length of engagement: we have included more commentary on the examples to show what the effect of different length of engagement would have been in each case.

Standard contracts: a lot of the discussion at the meetings was concerned with the need for service company workers to be able to decide with certainty whether the legislation would apply to them. It was also clear from the discussion that in fact a large proportion of consultants are engaged through agencies on standard contract terms, which contain most of the pointers to employment status listed in the paper.

To provide certainty for this group, the article makes clear that we will treat any engagement of one month or more on these standard contract terms as meeting the definition of employment, unless the worker can demonstrate a recent history of work including engagements which have the characteristics of self-employment (as in the "Charlotte" example). Contracts of less than a month, and cases where there is a pattern of other work, will be looked at on a case-by-case basis.

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