IR56
Employed or self-employed?
The key test as to whether a person is in or outside of IR35 will depend on the IR56 Schedule D/Schedule E test.
This means that notwithstanding the intermediary, would the worker be an employee or self employed in relation to the contract with the client or end user?
A typical example of this type of case decision is Hall v Lorimer [1994] STC 23.
Lorimer was a freelance vision mixer who worked on a number of short term contracts, providing specialised skills but not providing any equipment of his own. He was found to be a self employed independent contractor.
The Judge in this decision noted that in determining such cases, there is no de-facto check list procedure one should go through and in order to ascertain the position of the individual, one must look at all the details and consider the case as a whole.
This will involve taking stock of the following:
- Is the individual at financial risk in the project?
- Can the individual make losses as well as profits?
- Can the individual hire his/her own workers or provide substitutes for the job instead of him/her?
- Can the individual control the work? (This can encompass where the individual works, when the individual works, what the individual does and how the individual does it.)
Other vital ingredients to consider in order to establish whether a person is employed or self employed are:
- The intention of the parties
- The duration of the contract
- The number of engagements the individual has
- The pay structure e.g. does the individual receive holiday or sick pay and how is payment made – by task or by the hour or week?