There are a number of grey areas in the taxation of equestrian businesses; whether a worker is employed or self-employed is one of them. Just because your groom indicates that they want to be self-employed, does not necessarily mean they are.
A person is self-employed if they run their business for themselves and take responsibility for its success or failure.
Self-employed workers are not paid through PAYE, and they do not have the employment rights and responsibilities of employees. Someone can be both employed and self-employed at the same time; for example, if they work for an employer as a yard manager during the day and run their own horse schooling business in the evenings.
The tax consequences of wrongly treating a worker as self-employed when they should be an employee can be very costly and the position for each worker may be different. The onus for applying the correct tax treatment is on the employer and it is the employer who will be liable for any underpaid PAYE tax, national insurance and late payment interest and penalties.
Employment law and status
Employment law does not generally cover self-employed people because they are their own boss. However, if a person is self-employed they still have protection for their health and safety and, in some cases, protection against discrimination.
Generally, the self-employed person will have their rights and responsibilities set out by the terms of the contract they have with their client. A clearly written contract will help to establish the correct tax treatment.
Checking the PAYE position
Someone is probably self-employed and should not be paid through PAYE if most of the following are true:
- they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit;
- they can decide what work they do and when, where or how to do it;
- they can hire someone else to do the work;
- they’re responsible for fixing any unsatisfactory work in their own time;
- their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish;
- they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work; and
- they can work for more than one client.
If you are unsure how best to treat your equestrian worker, or would like advice on the contents of a self-employed workers contract, please contact Lucie Hammond on 01242 68000 or firstname.lastname@example.org