Mr Sandford was a service engineer for Slush Puppie Limited (SPL). From 2001 to March 2007 the individual had always considered himself to be self-employed and paid tax on that basis.
However; when his engagement ceased, the individual’s tax agents reviewed the situation and concluded that they believed he had been an employee of the company.
As a result they informed HMRC and sought a refund of self-assessment tax paid, suggesting SPL should be liable.
After a review of the facts HMRC accepted this view. They subsequently issued SPL with a notice that ruled Mr Sandford was an ‘employed earner’ and as result SPL were liable for income tax and Class 1 NICs.
SPL appealed.
The tribunal looked at several of the key indicators and found on balance Mr Sandford was self-employed.
Below are some of the key points which the tribunal felt indicated self-employment:
- He was free to take on business from elsewhere and was able, having accepted a job, to find someone else to do it.
- SPL’s supervision and control of his work was restricted to ensuring he complied with legal obligations
- The use of a daily rate of pay was ‘a strong indicator’ that matters were based on a daily contract. The fact that monthly invoices were raised for convenience did not alter this fact.
- The lack of redundancy rights or other employment protection meant Mr Sandford shouldered financial risk.
- The fact ‘that no substantial risks materialised in the course of five years is no indication that they did not exist potentially’.
The case does, however, highlight the importance of taking advice in this area as the company could have been liable for the tax due through PAYE should the tribunal have found that he was employed.