21 Dec 2012

“Subcontractor” actually an employee

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The judgement of Yurdaer Yetis v HMRC (2012) was released yesterday and makes for an interesting read in relation to employment status.

As with the case of Slush Puppie v HMRC, this employment status dispute at the Tax Tribunal was a result of an individual claiming they were an employee. In this case HMRC assessed Mr Yetis for unpaid tax and national insurance for the services he provided to Style Windows and Conservatories. Mr Yetis argued that he was an employee however and therefore not liable as the responsibility for operate PAYE and national insurance was therefore with the company.

Despite both HMRC and the company arguing he was self-employed, the tribunal found in favour of the individual and held that he was an employee during the relevant period.

Mr Yetis was engaged as a salesperson for Style Windows and conservatories working at a stand at Homebase and garden centre. He had no written contract with them apart from a simple document confirming he was self-employed and was left unsupervised when providing the services. Mr Yetis was paid a weekly amount of £200 per week with a small percentage of commission on top.

The tribunal judge considered all the key principles that have developed in the employment status field over the years and followed the approach seen in Market Investigations of looking at whether the individual was in business in their own account.

When discussing the legal principles, Judge Greg Sinfield confirmed that no one test can determine every case and that the business in your own account test is more relevant than control. Needless to say this does not sit overly well with cases such as JL windows, Express and Echo Publications and Montgomery v Johnson Underwood which were predominately decided on specific “tests” such as control and personal service.

Slightly contrary to the above, Mr Sinfield pointed out that if there is a requirement of personal service the relationship will not be one of employer/employee. This would imply that he may have accepted a lack of personal service in this case would have stopped the contract being one of employment, unfortunately however it was agreed by all parties that personal service was required and so this point was not really clarified in light of the later comments about business tests.

This case demonstrates that the courts can still be somewhat unpredictable in their approach and the weight they will give to different factors. We have seen many cases in the past where the individual panics when questioned by HMRC and says they should have been an employee. When the company has the individual and HMRC gunning for them it can make life very difficult.

The best way to avoid these issues altogether is simply to contract with Marble, that way you won’t have to worry about being left high and dry shoudl HMRC come calling.