Employment & Self-employment

When you engage an individual worker to provide services to your business directly (i.e. not through a PSC or other intermediary company), or you are that worker, it is important to consider whether the worker has the status of an employee of the business or is instead a self-employed person.

The catch-all expression “worker” used below refers to an individual (as opposed to a company, partnership or other organisation), whether they are an employee or self-employed. Both in the private sector business world and the public/voluntary sector, any one of a range of expressions might be used by an individual worker or a business engaging them to describe a self-employed worker.

Any of the following expressions will often be used to describe an individual who is a “self-employed” person: “sole trader”, “sole proprietor”, “self-employed”, “one man business”, “consultant”, “contractor”, “subcontractor”, “freelancer”, “independent contractor”. These are not legally defined expressions, they are imprecise, and they have no particular meaning for tax or legal purposes. It is important to be aware that each of these expressions is only a commercial/customary expression, not a legal or technical expression. In every case though, if the person concerned is genuinely self-employed, their legal status will be the same, whatever the expression used. Conversely, if in reality they are an employee, that will be their status whatever expression is used to describe their relationship to the business engaging them.

The difficulty for both an individual and the business which engages them to provide services is that, in terms of legal and tax status, the fact of merely labelling an individual as “sole trader”, “self-employed”, ”one man business”, “consultant”, “contractor”, “subcontractor”, or “freelancer” does not mean that they actually will be “self-employed” in law. Despite any such labelling, they might in fact be employees in law. 

The following downloadable documents help identify and clarify self-employed status:
Guidance Note on Employment, Self-employment, and IR35
Employment, Self-employment and IR35 Checklists
IR35 Status Determination Statement

The contractual templates available to download are divided into 2 groups:
Sole traders contracting personally - Self-Employment and Freelancer Contracts
Self-employed using a PSC - IR35 And Other Company Agreements

The application of any such document does not in itself make a party “self-employed”. Whether someone is in law self-employed is a question of law, and the use of a particular document or labelling does not in itself render someone to be self-employed. Correct documentation will, however, assist with the identification of the relevant status.

• Employed or Self-employed?
• Why does it matter whether a worker is self-employed rather than employed?
• How do you determine whether someone is employed or self-employed?
• Does the individual work through an intermediary? Does IR35 apply?
• Use of Suitable Contracts