Employment status has been in the spotlight recently, following successful status challenges brought by both Uber drivers and City Sprint couriers. More recently there have been claims by DX drivers and couriers working for Deliveroo and The Doctors Laboratory that they have ‘worker’ status.
Perhaps with these developments in mind, and ahead of the new obligations for public sector organisations engaging workers through an intermediary, HMRC released a new tool on 2 March 2017 (view the tool here). It’s intended to check the status of an individual or group of workers for the purposes of tax, NIC and VAT. Where the worker would be an employee of the client (for tax and NICs purposes) if they worked directly for the client, rather than providing services through an intermediary (such as a personal services company), the IR35 legislation will apply.
HMRC have advised that the tool can be used for both current and future engagements, and those working for both private and public sector organisations. They have also confirmed that HMRC will honour the result given by the tool unless it is shown that the information inputted is inaccurate.
Whilst potentially very useful, initial reports are that the tool is unreliable and has thrown up some unexpected results. For example, the existence of a right of substitution consistently produces a result that the individual is self-employed. In practice, this would not of itself be determinative of employment status, and previous guidance has acknowledged that a subtler approach is required when assessing employment status. We would therefore advise using the tool with caution until the teething problems have been resolved.
You should also be aware that the tool does not include a check for worker status, as this is a concept recognised only in employment law and not by HMRC; workers have some but not all of the rights afforded to employees. Also remember that whilst there is overlap between the tests for employment status applied by HMRC and employment tribunals, the tests are not identical.