Self-Employed Status Shattered

Worker for window company succeeds in claim he was an employee

Mr Yetis who worked for Style Superior Windows & Conservatories Ltd, as a sales lead generator, successfully persuaded the First Tier Tax Tribunal he was an employee despite originally signing a statement saying that he was self-employed.

During the period May 2005 – October 2009 Mr Yetis was engaged by Style, a supplier of doors, window and conservatories, to generate sales leads from a stand at Homebase in Cambridge and the Rookery Shopping Centre in Newmarket. All leads would then be allocated by the sales manager to a salesperson to pursue.  

Following an employment status enquiry, HMRC eventually raised assessments on Mr Yetis for the years 2005/06, 2006/07 and 2007/08 for a total amount of tax of nearly £9,000 plus interest. The taxpayer did not challenge the amount of the assessments but simply maintained that he was an employee of Style during the years in question.

No written agreement existed between the two parties, although around the time that Yetis started to work for Style he did sign a statement declaring that he was self-employed and confirming that he would be responsible for his own tax and NIC's. Neither party had retained a copy of this document however. Although he did not deny signing the statement, Yetis maintained that it did not reflect the true position and that he should never have been asked to sign it.

Throughout the period May 2005 – April 2009 Yetis was paid £200 per week plus commission. The rate of commission amounted to 2% of the VAT exclusive order value, that being 20% of the salesmen's commission. In March 2009 however Style told Yetis that they could no longer afford to pay him £200 per week but that he could continue to work for the company on a commission basis only. An exceptional one-off payment of £200 however was made by Style to enable Yetis to live in weeks when he had received no commission. Yetis continued to work under the new terms until October 2009 but during this time he was free to turn up at the stand any time he wanted. The taxpayer accepted that he was self-employed for this seven month period only.

Status tests:

Personal service/right of substitution

Style confirmed that Mr Yetis was neither permitted to engage a helper nor a substitute in his place. If Yetis had been unable to carry out the work himself then Style would have appointed one of the salesmen to man the stand or the stand would be unmanned.

This indicated that Yetis was an employee.

Mutuality of obligation

Both parties had to be obligated to each other; Yetis to carry out the work and Style to provide work if available. Here, the nature of the work meant that Style only had to provide the worker the opportunity to generate leads. The reality was that all Style was required to do was provide a stand with some promotional literature and a place to put it. This however was not regarded as a particularly strong indicator as Style provided the same facilities for use by the self-employed salesmen if Mr Yetis could not attend.

Control

Although Yetis worked unsupervised, Style decided on the location of the stand and therefore dictated where he would work for five days a week.

Business on own account

The Tribunal felt that this issue was more relevant than control. Although Mr Yetis had the opportunity to profit by generating more leads, it was felt that he was never at risk of making a loss as he received a steady £200 per week. Yetis provided none of his own equipment and bore no costs of investment. As such, the Tribunal considered he was not in business on his own account.

Intention of parties/ Integration

Unlike the salesmen, Mr Yetis received what was more like a regular salary. This indicated to the Tribunal that both parties regarded the relationship to be one of employment.

Conclusion

Mr Yetis was something of a hybrid worker, in that he worked unsupervised, like the self-employed salesmen but in a place specified by Style for five days a week, in the same way as employees. He was paid commission, just like the salesmen albeit at a lower rate than them, but was also paid a regular salary like the employees.

On balance therefore the Tribunal found that Mr Yetis was an employee during the period May 2005 – March 2009.