Contractors' Questions: What if I’ve been asked to join the payroll?

Contractor’s Question: I contract directly to an IT consulting SME as an individual, not a limited company, on a part-time basis working when I wish, albeit for a certain number of hours a week. But they want me to go on their books as they say they may be open to HMRC scrutiny. Would this likely be the case, and would joining their payroll help -- me or them?

Expert’s Answer: Working a set number of hours albeit with flexibility can apply to a situation of employment, but if you are organising the work, perhaps so that you are available to take on other clients’ work or simply to make the hours worked more profitable or suitable for you, then this would lean more towards a situation of self-employment. Another indicator of self-employment would be whether you have been engaged to deal with certain tasks, and you carry out those duties without anyone telling how and when to perform them. 

Or is it a case that you are working more as part of a team of employed workers? If that is the case, do you have the same rights as the employed staff and if there was no work in any particular week, is the company under an obligation to find work for you or pay you anyway? If the answer to these three question is ‘yes,’ then these are things which would lean towards you being in a situation of employment rather than self-employment.

It is advisable to use the online Employment Status Indicator tool to get an opinion from HMRC on your status, which you can access above or from your Personal  Digital Tax Account. You will then have a permanent record so that if your engagement did come under scrutiny, you would have proof that you have correctly determined your status.

If you were to ‘go on the books,’ you may be entitled to certain employment rights. But as a result, your engagement would become more expensive for the company when employing you personally rather than engaging you to provide a service, so it’s difficult to say who would benefit.

The overriding issue behind your question appears to be more evidence of the ‘fear factor,’ which is causing many companies to suffer from these knee jerk reactions and often to unnecessarily employ people who are genuine contractors.

The expert was former tax authority official Carolyn Walsh, a director of umbrella company CWC Solutions.