Employment Status - The Repercussions
The recent judgement in RS Dhillon & GP Dhillon Partnership -v- HMRC serves as a useful reminder of the dangers of engaging staff on a self-employed basis without a suitable written agreement being in place.
Here, the First Tier Tribunal (Tax) analysed the working arrangements of the delivery drivers engaged by Dhillon and determined that although the arrangements appeared to be consistent with being self-employed, the arrangement was in fact an employment contract. A key factor in the Tribunal’s decision was the absence of a written agreement, despite the arrangement looking similar on its facts to an earlier decided case regarding a different company with similar arrangements, within which the self-employed status was upheld.
This apparent inconsistency and “fact sensitive” nature of decisions on employment status is rather worrying for businesses who have engaged staff on a self-employed basis. The risk of a claim by one of them, or by HMRC, could result in a large liability on the part of the business to HMRC, the employees, or both.
Perhaps the most important issue here is the lack of a written agreement. In general, Courts or Tribunals will accept a written contract at face value, unless evidence points to it being a sham. If, however, there is no agreement, then an analysis of the way in which the work is done and the staff are paid could easily result in a finding that the relationship is in reality one of employer/employee, with all the rights and responsibilities that will incur.
Businesses are urged to ensure that anyone who is engaged on a self-employed basis have a suitable written contract, which is clearly a contact for services and not an employment contract.