Self employment

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    Introduction

    An individual doing paid work in the UK falls into one of three main categories:

    • an employee
    • a worker
    • self-employed

    Your PA’s employment status, i.e. whether they are employed or self-employed, is not a matter of choice. Whether a PA is employed or self-employed depends upon the terms and conditions of their engagement with you.

    HM Revenue and Customs (HMRC) regard most PA work as employment and therefore very few PAs are genuinely self-employed.

    Employment status is significant because employers will be liable for the majority of employment rights if those working for them are found to be employees rather than self-employed.

    There are essential tax and National Insurance contribution differences depending on employment status. You must recognise which category the people who work for you belong to, to ensure you fulfil your legal and tax obligations to them.


    Employed or self-employed?

    It is very important that you know the correct answer to this question (your PA’s ‘employment status’) because it affects the way that your PAs pay their tax and National Insurance. Your PA’s employment status refers to whether they are employed by you or self-employed (working for themselves).

    If you take a new PA on, you are responsible for determining their employment status. This applies to all new PAs, whether they’re full-time, part-time, permanent, temporary or casual.

    If your PA is an employee or worker then you, as the employer, are responsible for tax and National Insurance contributions (NICs) on their behalf. They are also entitled to paid holiday and may be eligible for a pension.

    If they are an employee or worker, your payroll service can calculate the relevant tax and National Insurance deductions that need to be made each time they are paid. If your PA is self-employed they are responsible for calculating and paying their own tax and NICs on any payments you make to them.

    What’s the difference?

    Employment status isn’t a matter of choice for either you or your PA. It’s a matter of fact, based on key terms and conditions of your working relationship with them. In most cases these terms and conditions will be reflected in your contract with the worker.

    But even if a contract says a PA is self-employed, if the facts indicate otherwise then the PA may be your employee. If you don’t get it right, you could end up having to pay extra tax, National Insurance, interest and possible penalties later as well as being liable for any holiday and pension contributions which they would have been entitled to as an employee/worker.

    In order to answer this question it is necessary to determine whether your PA works for you:

    Under an employment or worker contract issued to the PA by you in which case they are an employee/worker.

    Or

    Under a contract for services that the PA gives to you in which case they are self-employed,

    There is no statutory definition of these two types of contract. What you and your PA call your relationship, or what you consider it to be, is not decisive. It is the reality of the working relationship that matters. This is what HMRC will look at if you ask them to decide the employment status of your PA.

    Key questions to help you decide

    Whether your PA can be classed as self-employed, an employee or a worker often depends on their level of independence. Answering the following questions will help you to form a general picture of your PA’s employment status:

    If the answer to these questions is ‘yes’ If the answer to these questions is ‘yes’
    • Do they have to do the work themselves?
    • Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
    • Do they work a set amount of hours?
    • Can someone move them from task to task?
    • Are they paid by the hour, week, or month e.g. do they get a regular wage?
    • Do they get benefits eg paid leave, overtime pay or bonuses?

     

     

    • Can they hire someone to do the work or engage helpers at their own expense?
    • Do they risk their own money?
    • Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
    • Do they agree to do a job for a fixed price regardless of how long the job may take?
    • Can they decide what work to do, how and when to do the work and where to provide the services?
    • Have they done any self-employed work of a similar nature for other clients in the last 12 months
    • Do they have to correct unsatisfactory work in their own time and at their own expense?
    Your PA is probably an employee Your PA is probably self- employed

     

    The answers to the questions above will help you to form a general picture of your PA’s employment status. However, simply answering them is not enough on its own to act as a formal decision about your PA’s employment status.

    Five tests of self-employment

    These questions look at the five key tests of self-employment:

    1. Control: whether you as an employer can instruct the PA on how and which tasks to perform and when.
    2. Integration: whether they are part and parcel of your workplace.
    3. Mutuality of obligations: whether the PA is obliged to carry out the work themselves and whether you are obliged to pay them for the work.
    4. Substitution: whether someone else can be sent by the PA to do the job instead of them or whether they can take on extra helpers at their own cost.
    5. Economic reality: whether the PA bears the financial risks of failure to deliver the service and/or can profit from their work. This also includes factors like whether they provide their own equipment e.g. gloves, aprons and cleaning materials.

    HMRC provides further detailed information about self-employment on its website. To view this, visit: https://www.gov.uk/working-for-yourself.


    Requesting a decision from HMRC

    If your PA is self-employed you need to get formal confirmation of this from HMRC in order to ensure that you are protected from financial penalties. There are two ways of doing this.

    Check employment status for tax

    HMRC’s ‘Check employment status for tax’ tool enables you to check the employment status of your PA to determine whether they are employed or self-employed for tax, National Insurance contributions (NICs) or VAT purposes.

    To access this tool visit https://www.gov.uk/guidance/check-employment-status-for-tax.

    The ‘check employment status for tax’ tool will ask a series of questions about the PA’s work and will then provide an indication of their employment status. You can rely on the outcome as evidence of a PA’s status for tax/NICs/VAT purposes if you have met the following conditions:

    • your answers to the questions on the ‘check employment status for tax’ tool accurately reflect the terms and conditions under which the PA provides their services. Read the guidance notes on each page.
    • the tool has been completed by you the employer or your authorised representative (if a PA completes the tool the result is only indicative).

    However, you should print or save a copy of the ‘Keep a copy of your determination’ results page, which comes up when you have completed the ‘Do you want to add some details to this document?’ page.

    PAs who are directly employed by an individual, or related third party and self-employed PAs with an agreement to work directly for an individual and under their control without the involvement of an agency or employment business involved in managing or directing the care provided, do not need to be CQC registered for that regulated activity.   This is because the current regulated activity of personal care sets out an exemption relating to PAs (self employed and employed).

    For more information on what you need to check, please see employers’ template 7.2b Summary of important Steps to take when using self-employed carers.

    A letter detailing the relevant information required from the PA should also be sent. Once completed, it should be signed by both parties and kept as a written record. Please contact Independent Lives for a template.

    Please note Self-employed PAs should fund their own public liability insurance (which should ensure their business for the provision of care and personal support) and training and should show you the relevant paperwork, on request, before they start working with you.

    Employment Status Customer Service Unit

    You can also call HMRC to discuss your PA’s employment status.  If you do this, you must note the time of the call and the person you spoke to, in case of doubt later down the line. Phone:  0300 123 2326.

    You can also write to HMRC to check if your PA’s employment status.

    Write to:

    HMRC –

    HM Revenue and Customs

    Employment Status Customer Service Unit

    S0733

    Newcastle Upon Tyne

    NE98 1ZZ

    Another source of information is http://disabilitytaxguide.org.uk/ This is a very accessible and well written site with further information on self-employment and general tax rules.

    Frequently asked questions

    Does my service provider/self-employed carer need to register with the Care Quality Commission – CQC?

    Care Quality Commission – CQC – is the independent regulator of health and social care in England, who monitors, inspects and regulates health and social care services. People and organisations who are planning to run a health or adult social care service will need to apply to register with them as a service provider before they can carry out any of the activities the CQC regulates.

    A service provider can be an individual, a partnership or an organisation.  It is CQC that decide who needs to register with them and who might be exempt under certain conditions.  Where a person, or a related third party on their behalf, makes their own arrangement for nursing care or personal care, and the nurse or carer works directly for them and under their control without an agency or employer involved in managing or directing the care provided, the nurse or carer does not need to register for that regulated activity.

    What are regulated activities?

    By law service providers, such as agencies must register for each of the regulated activities that are carried out. Regulated activities are listed in Schedule 1 of the Health and Social Care Act 2008 (Regulated Activities) Regulations 2014. Here are the most relevant examples when focusing on using service providers linked to Direct Payments and Personal Health Budgets:

    • personal care
    • accommodation for a person who requires nursing or personal care
    • treatment of disease, disorder or injury
    • transport services, triage and medical advice provided remotely
    • nursing care

    What is personal care?

    The definition of personal care is broader than that used in previous registration systems. It covers physical assistance given to a person in connection with:

    1. eating or drinking (including the administration of parenteral nutrition);
    2. toileting (including in relation to menstruation);
    3. washing or bathing;
    4. dressing;
    5. oral care,
    6. the care of skin, hair and nails (with the exception of nail care provided by a chiropodist or podiatrist),
    7. the prompting and supervision of a person to do any of the types of personal care listed above, where that person is unable to make a decision for themselves in relation to performing such an activity without such prompting and supervision. For examples some clients with Learning disabilities or clients with Dementia might fall into these categories.

    As an advice service we highly recommend that if the PA is unsure whether they need to be registered with CQC, that they check this with CQC.

    Further details can be found on www.cqc.org.uk or contact CQC via their National Customer Service Centre on 03000 616161 or email enquiries@cqc.org.uk.

    The person I would like to use for providing support to me is a self-employed child minder/cleaner/nanny/hairdresser/accountant.  Does this mean this person is automatically self-employed to provide general support and/or care for me?

    Your PA’s employment status, i.e. whether they are employed or self-employed, is not a matter of choice and it is not relevant if the person is self-employed in a different occupation/different working relationship with other people.  Whether a PA is employed or self-employed depends upon the terms and conditions of their engagement with you.

    HMRC regard most care work/personal assistant work as employment and therefore very few PAs are genuinely self-employed. Please contact our advice service and discuss the conditions and circumstances of your working relationship with the potentially self-employed PA.

    The person I would like to use for providing support to me says she/he is registered as self-employed with HMRC. Does this mean this person is automatically self-employed to provide general support and/or care for me?

    Your PA’s employment status, i.e whether they are employed or self-employed, is not just a matter of choice or simply registering with HMRC as self-employed. Whether a PA is employed or self-employed depends upon the terms and conditions of their engagement with you.

    Please use the HMRC ‘Check employment status for tax’ tool. HMRC regard most care work/personal assistant work as employment and therefore very few PAs are genuinely self-employed. Please contact our advice service and discuss the conditions and circumstances of your working relationship with the potentially self-employed PA.

    Last updated:  3rd November, 2022