ESM1011 - Detailed guide to determining status: ‘in business on own account’ test

An approach to determining status, which has received extensive judicial approval, is that adopted by Cooke J when he was considering the status of a market researcher. He said

'Is the person who has engaged himself to perform these services performing them as a person in business on his own account? If the answer to that question is 'yes' then the contract is a contract for services. If the answer is 'no' then the contract is a contract of service.'

[Market Investigations Ltd v The Minister of Social Security (see ESM7040)]

This goes to the heart of the matter. It draws a distinction between the individual who works under the control of and as part of the business of another and the individual who goes it alone and sets up 'on his own account', bearing responsibility for the success or failure of the enterprise.

The 'in business on own account' test does however have its limitations. For example, it may not be particularly helpful when considering an engagement entered into by someone carrying on a profession or vocation. By way of illustration, an actor may earn his living without any of the normal trappings of business - such as stock, premises, staff, etc - yet for many engagements he is likely to be self-employed (see ESM4121).

In this type of situation it can help to consider in more detail the question of control and of other factors that may be present (for example whether the individual is dependent upon or independent of a particular paymaster for the financial exploitation of his or her talents).