Disagreement with employer re employment status

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I'm a company accountant and the managing director has temporarily engaged someone on an 'self-employed' basis - problem is, it's blatant that the individual should be treated as an employee.

Having already raised my concerns, the first invoice has come across my desk for processing. Should I make payment under protest, or refuse to proces it?

Replies (30)

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By David Ex
27th May 2022 12:37

Same employer as last December?

https://www.accountingweb.co.uk/any-answers/a-little-quandary-advice-app...

Same answers apply.

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By Hugo Fair
27th May 2022 12:47

If you remove the emotive words (like 'blatant'), then you could concentrate on understanding how the legislation operates ... and making sure that this is shared (in writing) with your boss.

Having merely "raised (your) concerns" nothing has changed ... although I'm not sure why you feel your only options are to make payment under protest, or refuse to process it? Is it part of your role to make such a decision?

Start with whether your employer has correctly followed the rules when carrying out the employment status assessment ... and move on to the fact that unless they have as a result issued a formal Determination in writing (of IR35 status) then by default they (not the employee or whatever the true status) will be liable for any tax/nics if HMRC later determine those are due.

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Replying to Hugo Fair:
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By Sandnickel
27th May 2022 13:03

IR35 wouldn't be an issue in this case. As the "employee" is self employed (and thus no intermediary) the onus would always fall on the engager first.

I agree that OP needs to make a case as to why they believe this individual should be employed rather than self employed and back this up to the boss in writing with the consequences of getting it wrong. If you are overruled at this point then you at least have this evidence.

You would then need to make a judgement on whether you continued to make the payment or not.

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Replying to Sandnickel:
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By Hugo Fair
27th May 2022 13:45

You are of course right and put it much better (temporary IR35 word-blindness accidentally crept in to my comment)!

Justin has located the same helpful LITRG article that I was about to mention ... and as usual encapsulates more succinctly the gist of what I was trying to suggest when he prescribes 'taking a chill pill' for the OP!

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By Justin Bryant
27th May 2022 13:55

Have a chill pill and then review this helpful guidance: https://www.litrg.org.uk/tax-guides/self-employment/am-i-employed-self-e...

NB in HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501 and Kickabout Productions Ltd v HMRC [2022] EWCA Civ 502, the Court of Appeal considered that in the absence of statutory rights for vulnerable worker issues, it is not legitimate to apply the Autoclenz approach, and normal principles of contractual construction apply. So Autoclenz is basically now of no relevance to the above guidance (subject to any SC appeal of course).

So all else being equal, self-employment status is now more likely following the above CoA cases (given the parties draft the contract and so can include whatever terms they like). See:

https://www.devereuxchambers.co.uk/resources/blog/employment/view/kickab...

https://www.rossmartin.co.uk/sme-tax-news/6236-kaye-adams-ir35-rules-out...

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Replying to Justin Bryant:
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By Justin Bryant
27th May 2022 14:58
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By CJaneH
27th May 2022 13:54

Judging from your previous post you are not going to convince this director that your version of tax law is correct. Can you cover yourself by internal memo's or emails so you have evidence you have notified him? Difficult in some businesses. Keep a record actions you disagree with. Decide if you wish to move.

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By Tax Dragon
27th May 2022 15:51

The amount of stuff that is blatantly obvious to me - but that I am entirely wrong about - is scary.

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RLI
By lionofludesch
27th May 2022 20:11

Nothing about employment status is ever "blatant".

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Replying to lionofludesch:
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By Barry Carlisle
27th May 2022 20:27

Perhaps not. But someone doing exactly the same work as 20 other employees, albeit for less than a month on a casual basis? No outlays and no risk.

Seems you can get HMRC's CEST tool to either:
- spew out a "self-employed" answer by simply stating that you'd accept a substitute, even though the situation is highly unlikely to arise over the brief period of engagement, and the individual is not in business, is not registered for self employment and has no employees, or
- state they are employees by stating you'd reject a substitute.

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Replying to Barry Carlisle:
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By lionofludesch
27th May 2022 20:57

Barry Carlisle wrote:

Perhaps not. But someone doing exactly the same work as 20 other employees, albeit for less than a month on a casual basis? No outlays and no risk.

Seems you can get HMRC's CEST tool to either:
- spew out a "self-employed" answer by simply stating that you'd accept a substitute, even though the situation is highly unlikely to arise over the brief period of engagement, and the individual is not in business, is not registered for self employment and has no employees, or
- state they are employees by stating you'd reject a substitute.

Exactly.

If it's low gradework, why wouldn't you accept a substitute ?

The caveat is that obviously, we're low on facts here.

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Replying to lionofludesch:
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By Barry Carlisle
27th May 2022 21:53

Duplicate

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Replying to lionofludesch:
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By Barry Carlisle
27th May 2022 21:53

Duplicate

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Replying to lionofludesch:
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By Barry Carlisle
27th May 2022 21:54

Perhaps the most appropriate response would be to again point him towards the CEST tool, warn of potential consequences of misclassification, and then simply accept it if he's adamant that it's a self-employed arrangement. He's the one that agreed the terms with the worker.

Why these stupid arrangements have to arise in the first place is beyond me. The prudent option would be to put them on payroll with the rest of the employees they're working alongside.

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Replying to Barry Carlisle:
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By The Dullard
27th May 2022 22:28

Triplicate!

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Replying to Barry Carlisle:
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By DKB-Sheffield
27th May 2022 23:40

Perhaps... pointing the employer to CEST, and warning them of the consequences thrice... is the way to handle it! He certainly can't say you didn't tell him so that way!

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Replying to DKB-Sheffield:
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By paulwakefield1
28th May 2022 08:56

I'm going to breach Lion's copyright

[chuckle]

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Replying to paulwakefield1:
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By lionofludesch
28th May 2022 09:15

paulwakefield1 wrote:

I'm going to breach Lion's copyright

[chuckle]

[chuckle] ©

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Replying to lionofludesch:
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By Hugo Fair
28th May 2022 09:51

Oh dear, is that retrospective? Can I have time to pay?

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By sanjay100
28th May 2022 10:43

Its commendable you are trying to do the right thing and checking the facts

I would resign and become self employed yourself ! I think you are too good for them.

From your previous post you already had a clash with the director who seems to think there are no rules in this game. You have to ask is it really worth it. From experience it will just get worse and the director will continue to test the waters which will leave you extremely frustrated and stressed.

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Replying to sanjay100:
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By Hugo Fair
28th May 2022 11:28

Too little detail (and only one side of the story) to say with certainty ... but you're probably right.

As they used to explain when a member left a pop group ... "musical differences"!

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By Justin Bryant
29th May 2022 12:40

Haven't you all missed the point here?

Per my above comment, following HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501 Autoclenz is now irrelevant, so normal contract interpretation applies and a substitution clause should now work (courts can no longer apply Autoclenz to simply ignore such a clause if no substitute was provided or it was unlikely in practice etc.).

So all this chap needs is a new contract with a substitution clause to ensure no MOO (which works under the CEST Tool too). As far as I'm aware the only thing that can defeat this is sham, which is hard for HMRC to prove.

If you disagree please clearly explain why with reference to contract interpretation case law and not the usual Aweb hand-waving irrelevant guff.

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Replying to Justin Bryant:
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By WhichTyler
29th May 2022 13:29

Justin Bryant wrote:

If you disagree please clearly explain why with reference to contract interpretation case law and not the usual Aweb hand-waving irrelevant guff.

Are we allowed to cite Homes under the Hammer or Dragons' Den?

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Replying to WhichTyler:
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By Justin Bryant
30th May 2022 09:54

But that was obviously just to illustrate the relevant facts; not the law.

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Replying to Justin Bryant:
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By TASG
01st Jun 2022 11:39

You might be overstating things when you state Autoclenz is irrelevant.

It remains the case that in cases of considerable disparity in bargaining power, contractual provisions which misstate the commercial reality are ignored, and there is limited value in crafting a compliant contract. However, Atholl House was held not to be of a case low paid casual worker signing on the dotted line.

What is new is the emphasis of MoO (mutuality of obligations) as a necessary but not sufficient condition for any employment to exist.

The implication that most casual / 'zero hours' workers are not in fact employees is revolutionary.

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Replying to TASG:
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By Justin Bryant
02nd Jun 2022 10:09

You've got that totally wrong re Autoclenz. Go and read the recent Tax Journal and Taxation Magazine etc. commentaries on HMRC v Atholl House Productions Ltd [2022] EWCA Civ 501.

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By petestar1969
01st Jun 2022 10:20

Hmm, just process the invoice.

If it bothers you that much, register personally with the NCA (or w/e its called this week) and file a SAR.

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Replying to petestar1969:
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By TASG
01st Jun 2022 11:47

If the OP works outside the regulated sector as a company accountant, in, say, a widget factory, that option would not be open to him.

In addition, reporting suspicions is entirely independent of, and does not permit, actions which are not permitted under a professional body's code of ethics.

I do agree with you that the OP face a stark decision as to whether he is going to stay and be involved with activity he considers wrong, possibly unlawful, and certainly unethical - or to go and seek his fortunes elsewhere at his own financial risk.

It is most unfortunate that people like the OP are often penalised. He is being forced to choose between risking not being able to put bread on his family table; or risking his own personal professional standing for the greed of his boss.

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Melchett
By thestudyman
02nd Jun 2022 09:35

I'm afraid I can only offer a employee related opinion. Time to dust off that cv - the job market is insane right now and there are many many vacancies. You do not have to stuck working in environments such as this.

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