Why does it matter whether a worker is self-employed rather than employed?
The legal status of an employee differs from that of a self-employed person: a different level of statutory and common law protection is afforded to employment compared to self-employment. In particular, self-employed workers (not just employees) may be covered by equality legislation. We have set out in the Guidance Note: Employment, Self-employment, and IR35 , a list of rights of a worker if they have the status of employee.
If a worker is self-employed, the client need not operate Pay as You Earn (PAYE). H M Revenue & Customs (HMRC) is therefore suspicious of any artificial self-employment relationship.
A worker’s status in tax law may be different from the worker’s status in employment law.