Tooled Up!

At last, what we’ve been waiting for – HMRC’s Employment Status On-line Tool.


I’ve had a look through the on-line tool and, well, it’s not as bad as I feared.

  • The first three questions do some basic data gathering about who is using the tool and the nature of the contract that’s under consideration. Nothing controversial there.
  • The fourth question about whether or not the worker or their business is an office-holder with the end-user is fair enough on a status questionnaire.
  • Now the detail starts – ‘During this engagement has the worker’s business arranged for someone else to do the work instead?’ With the sub-text explaining: This means someone who:
    • Was equally skilled, qualified, security cleared and able to perform the worker’s duties
    • Wasn’t interviewed by the end client before they started
    • Wasn’t regularly engaged by the end client
    • Did all of the worker’s tasks for that period of time
    • Was substituted because the worker was unwilling but not unable to do the work

This seems likely to get a ‘No’ answer in most cases, as it’s talking about actually sending a substitute rather than having a right to do so.

  • The next question explores the right to send a substitute, with exactly the same sub-text as the previous question. It’s interesting to ponder what constitutes an interview and further what difference there is between a worker’s unwillingness, rather than inability to do the work. Where’s the line between I’m unwilling to do the work because of debilitating man-flu and I’m unable to do the work because of debilitating man-flu? And if a substitute is sent, who cares about the worker’s reason for absence?
  • Question 7 then looks at who pays the substitute. I answered that it was the worker and was immediately thrown out of the on-line tool with the cheery message that the intermediaries legislation does not apply to this engagement. In the interests of research, I changed my answer and ploughed on.
  • The next question deals with the worker using an assistant, giving the example of university lecturer using a researcher. I can’t see that many contractors will be using assistants, although, if the lead of certain MPs is followed, then a number of family members could be so employed! That’s it for the personal service questions.
  • We now move into the control questions, with the first one being about the end-user’s ability to move the worker to a task other than the one that he’s contracted to carry out. The tool is likely to get most use for public sector engagements initially and this may not be a problem in this sector, but I can see this tripping up a number of private sector engagements – yes, that’s you, construction industry.
  • Next, ‘Once the worker starts the engagement, can the end client decide how the work is done?’ With the explanation, ’This includes the need to follow the end client’s specific employee procedures, processes or guidelines. It doesn’t include following statutory requirements like health and safety.’ This may take a bit of unpacking, as, no doubt, a lot of employee procedures will have at their heart health & safety and security rules.
  • Question 11 deals with working hours and who decides. Surely this is only tentatively relevant to whether or not a worker is controlled in how the tasks are undertaken?
  • Having had how and when, the where question next is inevitable. And not that relevant.
  • Then we move on to the tools & equipment question. This includes the observation about purchase of equipment to carry out the contract under review, as opposed to use of equipment already owned. Surely both buying equipment to fulfil a contract and investment in fixed assets to carry out various contracts would be indicative of self-employment, rather than employment?
  • Now on to wage rates:
    • An hourly, daily or weekly rate
    • A fixed price for a specific piece of work
    • An amount based on how much work is completed
    • A percentage of the sales the worker makes
    • A percentage of the end client’s profits or savings

I think we can all see where that’s going.

  • Then onto putting errors right – who bears the cost or risk?
  • The holiday pay, sick pay, benefits in kind, etc question. If you get these, why are you even thinking about your status?
  • Next up, the hiring, firing, appraising, deciding pay rates, embedded in end user’s management question. If a contractor is acting as line manager, then the contractor’s self-employed status should really be questioned!
  • Does the worker interact with the end client’s customers, clients, audience or users? These are people who use or are affected by the service provided by the public body, corporation or business. This would not include the worker’s colleagues or other employees. This needs thinking about and, say, a debt collection agency would seem likely meet this criterion.

Then, bingo, there I was in the intermediaries’ legislation. I’d tried to walk a line with my answers between employment and self-employment and I’d toppled over the edge. I looked back at the summary of questions and answers and wondered if there was one question that had tipped the balance. Clearly I’m going to need a few more attempts to get the desired answers! That’s the problem with an invented set of circumstances.

There’s a clear summary of the outcome, which can be saved or printed out and could be useful evidence of a worker’s status. However, to be adequately robust I would recommend that a note of the thinking behind each answer is made, so that when HMRC questions a decision in, say, two years’ time, there’s a contemporary record of the thought process.

Overall the tool seems to give a reasonably good workout on personal service and control, as well as giving indicators on other more peripheral factors. What it does not do is look at Mutuality of Obligation. I can understand why, as it’s quite a difficult area to scope, but it can’t be ignored. It’s not yet clear what weighting is given to different answers, but it may be possible to gauge that after further usage.

I’m inclined to use the on-line tool as a sense check, after carrying out contract reviews in the usual way. Certainly, if an honestly completed tool gives an answer that indicates IR35 doesn’t apply, that will be very useful evidence in the face of any HMRC questioning that may occur in future.

If you have any concerns over use of the on-line status tool or status issues more generally, please email or call 01462 687 333 and we will help you understand your position.

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