Apparently I know what I’m talking about!
I spend a lot of my time arguing.
I argue with my kids (bed time, noise, screen time etc).
I argue with my hairdresser (you are not cutting my hair – I’ve had it cut once this year already).
I argue with the court (what do you mean you’ve lost the file AGAIN).
I argue with the other side (I’ve said my client isn’t going to settle for that little. Which part of NO do you not understand).
And occasionally I argue with my clients, because sometimes they don’t like my advice. Of course, that doesn’t make me wrong.
One of the most common arguments is “but the contract says” or “but we never signed a contract”. Whilst both of those points are relevant, neither is definitive. Just because you don’t have a signed contract, doesn’t mean there isn’t something binding between you. It just might be harder to work out what the terms of the agreement are. Just because your contract says something, doesn’t mean it’s enforceable. The example I usually give is, if the agreement told me to kill you, does that mean if I don’t, you can sue me for breach of contract! Of course not.
Nevertheless, clients often say that their staff are self employed, simply because they have agreed to that in writing and that that is standard practice in their industry (the old “everyone else does it” argument). The reality is that if HMRC and a Tribunal wanted to challenge that, they would look at the agreement, but they would also look at what the parties were doing in practice. If what they were doing in practice was more like an employer/employee relationship, then that may well take priority over the written agreement.
Clients will often challenge me on this, as is their right, and they don’t have to agree with me – it’s up to them whether they want to take the risk or not.
Of course, now you don’t need to decide whether I’m right or not, due to a recent case which, not surprisingly, said that I was right. In a recent Tribunal case HMRC originally lost on this point, but it went to a more superior being, who said that looking at what the parties were doing in practice (specifically notice periods and the fact that the person couldn’t delegate his work to a third party) he was an employee and not self employed, even though there was an agreement that said he was self employed. Or, put, another way, what they did took priority over what they said.
So what does that mean for you? Well if you have staff who are employees, nothing has really changed. If you have people who work for you on a self employed basis, you might want to consider whether they are genuinely self employed, irrespective of what you’ve agreed between you. Simply the fact that they invoice you and you pay those invoices rather than paying them PAYE will NOT protect you. There is much more to it than that. I know!
Kleyman & Co Solicitors. The full service law firm. Getting it right so you get it right.