Deciding the status of your personal assistant
More information about tax employment status
It is important that you get the tax employment status of your personal assistant (PA) right so that the correct type of tax and National Insurance is accounted for and collected at the right time. In general, we would expect most PAs to be employees, however this page will help you understand what you should consider when deciding the status of your PA and where to get further help if you find it difficult. Remember that their status for employment law may be different.
Who decides the employment status of my PA?
How do I decide if my PA is employed or self-employed?
Contract of service
Contract for services
What if I have more than one PA?
What help is available with the tax employment status?
I'm still unsure/confused – where can I find more information?
It is your responsibility to decide the tax employment status of your PA – including ones that you are matched with via an ‘introductory’ agency (even if the agency calls the PA self-employed).
However, you cannot just pick an employment status because it is better for you or because your PA prefers to be employed or self-employed. In addition, your worker will not automatically be self-employed just because they have an existing Unique Taxpayer Reference (UTR) and submit Self Assessment tax returns each year; or because their position lacks permanency; or because they provide their own small tools.
The correct status depends on the relationship you have with your PA and the wider circumstances of the particular person. It is a matter of fact rather than choice.
The starting point will be the nature of the agreement (whether written or oral) that you have with the PA. However, this will not necessarily be conclusive because if the facts indicate otherwise, put simply, tax law and/or employment law can override what either you or your PA intended under the contract. So even if you have a contract with your PA that says they are self-employed, if the facts indicate otherwise then they could be regarded as your employee in the event of any challenge (for example, see the case of Chatfeild-Roberts v Phillips & Universal Aunts Limited).
It is therefore important that you apply the criteria listed below when deciding tax employment status. In addition, HM Revenue & Customs (HMRC) can provide help to work out tax employment status as explained below.
Let us start by saying that tax legislation does not tell us whether a worker is employed or self-employed. The distinction between the two is based on HMRC practice and cases decided by the Courts.
The general rule from HMRC practice and the Courts is that your PA will be:
- Employed if they work for you and do not have the risks of running a business.
- Self-employed if they run their own business on their own account and are responsible for the success or failure of that business.
In deciding whether a person is in business on his or her own account or working for someone else, a variety of factors are relevant. Some of the main ones are outlined below, however it is unlikely that one of them on their own will determine the status.
Mutuality of obligation – Where an engager (the person taking on a worker) is under an obligation to provide and pay for work and the worker is under a similar obligation to accept the work and to perform the tasks delegated to him, this usually points to the relationship being one of employment. If a worker is self-employed, he will have no guarantee of work and even if work is offered to him, he is under no legal obligation to accept the work offered.
Right of control – The fact that a worker may be told how to perform duties will usually be seen as a strong pointer to employment. On the other hand, a self-employed person will have far more control over the jobs that he or she undertakes and the deadline for completion of those jobs.
Provision of own equipment – An employee is rarely responsible for providing his or her own equipment. A self-employed person, on the other hand, will normally be responsible for providing the necessary equipment to enable him to undertake the work offered. Note that this factor will only be relevant in helping to decide status where items of equipment are significant – the provision of small items like gloves or aprons will be ignored.
Right of substitution and engagement of helpers – An employee will have no freedom to send a substitute in his or her place if, for whatever reason, they are unable to perform their duties. Similarly, an employee will rarely be allowed to engage the services of a helper or assistant. On the other hand, if a self-employed person has contracted to do a job and is either sick or double-booked, that self-employed person will usually have the unfettered (or unrestricted) freedom to provide a substitute to complete the job in his or her place.
Financial risk – Individuals who risk their own money by (say) buying equipment needed for the job, bearing the running costs and paying for overheads and materials, are almost certainly self-employed. Employees are not usually expected to risk their own capital. Self-employed workers may also be required to rectify unsatisfactory work in their own time and at their own expense.
The number of paymasters – A typical employee has one paymaster – he is paid by his employer and no-one else. However, if a worker typically performs services for a number of different clients, he is more likely to be self-employed. Note that this is only one factor used to determine status – while many PAs may work for more than one person, it is perfectly possible that they are an employee of each of them (when you look at the arrangements in the round).
In most cases, it is generally straightforward to apply the criteria and decide tax employment status. Where it is not so clear-cut, HMRC used to have a good factsheet that contained a series of indicators to help employers. This factsheet is no longer in circulation (employers are directed to guidance on GOV.UK instead, but this is not as clear), so we have summarised the indicators from it below:
An individual is likely to have what is known as a 'contract of service' and so be employed by you if most of the following statements apply to them:
- you can tell them what work to do, as well as how, where and when to do it
- they have to do their work themselves
- you can move the worker from task to task
- they are contracted to work a set number of hours
- they get a regular wage or salary, even if there is no work available
- they have benefits such as paid leave or a pension as part of their contract
- you pay them overtime pay or bonus payments
- they manage anyone else who works for you
An individual is likely to have what is known as a 'contract for services' and so be self-employed if most of the following statements apply:
- they can hire someone else to do the work you have given them, or take on helpers at their own expense
- they can decide what work is done and when, where, or how it is done
- you pay them an agreed fixed price – it does not depend on how long the job takes to finish
- they can make a loss or a profit
Even if none of the statements in the previous list applies, your worker is still likely to be self-employed if most of the following apply to them:
- they use their own money to buy business assets, pay for running costs and so on
- they are responsible for putting right any unsatisfactory work, at their own expense and in their own time
- they provide significant tools and equipment that are fundamental for their work
HMRC’s Employment Status manual provides much more detailed guidance about the different criteria to be taken into account in deciding the employment status of individuals.
There is no single test to determine employment status. Each case has to be looked at carefully and all of the factors above considered and weighed up (where certain factors are not relevant, they will carry less weight). In general however, we would expect most PAs to be employees. Indeed, HMRC's Employment Status manual says the following:
‘Care provided in client’s home – The case law tests normally indicate that a careworker who looks after a client in the client’s home is likely to be an employee. In particular there will often be a significant right of control, for example the carer required to arrive at a pre-arranged time and perform tasks at the request of the client. On occasions the facts may indicate self-employment. For example, it may be the case that a careworker looks after a number of people concurrently and has a business organisation in place.’
There are some different rules that apply to certain groups of people such as agency workers and family members. See our exceptions section for more details.
You must decide the employment status of each PA separately. Just because one PA is employed, it does not mean they all will be. You should consider the criteria above for each PA you use.
Your PA may have another job. You need to work out their status solely for the work they do for you. A person can be employed and self-employed at the same time. For example, they may be employed by you during the day as a PA but they may teach music as a self-employed person in the evening.
HMRC can help you determine the tax employment status of your PA.
They offer an online 'check employment status for tax' tool which you may be able to use to help you. It will ask you a set of questions about your situation and at the end, it will give you an indication of your PA’s status for tax.
However, you are asked to click on ‘statement’ answers rather than yes/no answers. As such, there are a number of limitations with the tool as far as care and support employers are concerned, which means that you may not get a reliable result and that you may be better off contacting the HMRC customer service team to request a written opinion about your situation.
Things to watch out for if you want to try and use the tool, include the following (this list is not exhaustive):
- When using the tool and answering the first question ‘Which of these describes you best?’ as an employer you should select ‘End client’. Although the explanation on the tool says that ‘The end client is the public body, corporation or business that the worker is providing services to’ this is also the category to select if you are an individual taking on a PA.
- Selecting ‘End client’ means that the tool then goes on to refer to you in the third person as ‘the end client’ for the remainder of the questions (e.g. 'Can the end client move the worker to a different task or project than they originally agreed to do?' rather than 'Can you move the worker to a different task or project that they originally agreed to?') which is a little bit confusing. It may be helpful to substitute the words ‘the end client’ for ‘you’ and ‘the worker’ for ‘your PA’ and read the question again (e.g. Can you move your PA to a different task or project then they originally agreed to?).
- The third question asks ‘How does the worker provide their services to the end client?’ – you should choose ‘As a sole trader’ to access the part of the tool that you need (i.e. the bit that deals with ‘general’ status enquiries).
- There is also some quite technical language used in the questions, which can make them difficult to understand. For example, the fourth question asks ‘Is the worker or their business an office holder for the end client?’. The term ‘office holder’ has a particular meaning in tax law and includes treasurers, trustees, company directors, company secretaries or other similar statutory roles. The person you take on as your PA will not be an office holder.
- There is often no ‘Not Applicable’ option, which can make it difficult to answer questions which do not apply, e.g. there is a question ‘If the end client isn't satisfied with the work, does the worker need to put it right at their own cost?’ – but this hardly seems relevant to someone giving personal care. In this case you should pick the answer that seems to be most appropriate – e.g. ‘No – the worker wouldn't be able to put it right because the work is time-specific or for a single event’.
- It is possible for the tool to give ‘unknown’ results.
If you are uncertain at all about what to do or what a question is getting at, then please contact the HMRC employment status customer service team who should be able to help you further.
(While there is an option of ‘Get help with this page’ at the bottom of each section, please note that completing this will just see an automatic response given that someone will contact you in 2 days and this is unlikely to be a technical tax specialist.)
HMRC say that you should be able to rely on the tool answer as evidence of your PA’s status for tax and National Insurance contributions, provided you answered the questions accurately based on the actual terms and conditions under which the person provides their services to you and provided the tool has been completed by you or your authorised representative.
As such, you should print or save a copy of the enquiry and result screen so that if there are any questions from HMRC at a later date, you can show these as evidence that you ran a tax employment status check.
You should however, be aware, that if HMRC do not ‘like’ the answer that the tool has given, their caveat (that its binding unless you did not answer the questions accurately) still gives them quite a lot of scope to recategorise your PA, as they can simply say that they do not agree that the way something has been answered is accurate. This is particularly important to take on board given the problems care and support employers may face in getting a reliable result, as set out above. If you are in any doubt, we suggest you contact the HMRC customer service team to ask for a written opinion.
You should keep a record of any information or guidance you used, to make your decision about the tax employment status of your PA(s). This should include notes of any telephone calls with the customer service team. This will be helpful if HMRC ask any questions at a later date – see our section on getting employment status wrong for more information on compliance enquiries.
We know that employment status is an area that causes care and support employers real difficulty, particularly as the law around becoming an employer may not have been raised with you before – even by those in charge of handing out the government funds you may be using to pay your PA.
As such, we have launched a detailed factsheet to explain the technical and difficult rules around employment status for tax purposes. It contains information and guidance on a number of areas, including:
- Why is it important to know if I’m an employer?
- Who decides if my worker is employed or self-employed?
- How do I decide if my worker is employed or self-employed?
- How do I apply the rules?
- What help is available with working out status?
- Using HMRC’s Check Employment Status for Tax tool
- What if I get my PA’s status wrong?
- What if my PA insists on being self-employed?
- Okay, I’m an employer, what do I do now?
It also contains a helpful ‘real-world’ example of what a genuinely self-employed PA might look like and a set of ‘mythbusters’ (we know that some PAs may be reluctant to become an employee as they think, sometimes wrongly, that they will be worse off).
If you are still unsure or confused, you may also find it useful to read the case of Chatfeild-Roberts v Phillips & Universal Aunts Limited in which a live-in carer was found to be an employee of the client, even though they viewed her as self-employed. Although this case was an employment law case, rather than a tax law case, it is useful for two reasons:
- we can clearly see the application of the employment status tests to a PA situation, and
- we can see that a court will always consider how a contractual relationship actually works in practice.