Are you really self-employed?
When I was first asked to write this article, I said, “Sure, no problem.” The more I though about it, the harder the job got – this is because there are so many different ways of presenting the information. Then I got an idea – so let’s see how we go.
If you look at the Revenue literature, there are a number of different ‘tests’ they look at to decide whether you are employed or self-employed. However, since 6 April 2000, there is a third possible status – IR35 (more on this later). The table below sets out the principal pros and cons of each of the three statuses.
| Status | For | Against |
| Employed | Pay received net of tax & NI | No expenses claimable |
| Self employed | Expenses claimable | Pay tax & NI in large lumps |
| IR35 | Yet to be established | Everything |
Employed. In this scenario your employer takes the patient fees and then pays you after deducting tax and National Insurance. The Revenue argument against expenses is that these are only allowable if they are wholly, exclusively and necessarily required for the performance of your duties. Now, if your employer won’t pay these expenses for you, they don’t consider them necessary and therefore they are not allowable.
Self-employed. Here you are paid directly by your ‘customers’ (patients or principals) and you account for your own tax and National Insurance. You can claim ‘allowable expenses’ against your income before tax is calculated. In this case, there is a (slightly) more relaxed approach to what constitutes an allowable expense.
IR35. In essence, the Revenue are looking for whether you are truly self-employed or if you are in some form of ‘disguised employment’. If the latter, you will be forced to pay employers National Insurance at 12.8% on 95% of the gross income received from your ‘employer’. Then, you will be taxed on your trading profits and, at this stage, there is some uncertainty as to whether they will try and charge you Class 2 and Class 4 NI contributions as well.
So, having put you to sleep, let’s see what guidance I can give as to whether you’re self-employed. What follows is not exhaustive, and you cannot take any one ‘test’ in isolation.
I mentioned the tests that the Revenue looks at – one of the principal ones is ‘Risk & Reward’. In other words, who takes the risk and who gets the reward? (From this point, I am writing this article from the point of view of an associate; next article I’ll look at the implications on the principal.) If your principal has an arrangement with you that guarantees you a certain level of income irrespective of the number of patients that you treat, then the Revenue could seek to make you either an employee or an IR35 case.
Another test is ‘Control’. Does your principal control the way you treat patients? If yes – an indication of employee or IR35.
Next one - ‘Provision of major equipment’. Who pays for your treatment couch – normally your principal? Another indication of employee or IR35.
If you are only working for your principal, then you have an even bigger problem – the chances are that you are receiving one cheque a month and not having to buy anything in terms of medicaments, strappings etc.
If you recognise your situation in the above, then you urgently need to consult with a professional adviser who is conversant with your profession. Should you wish, feel free to e-mail me on mbb@mbbfcca.co.uk and I will be pleased to review your case.