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B had been employed by D Ltd to carry out general maintenance at their hotel. Following his retirement he continued to work in the same capacity but he was treated by his former employer as self-employed on a contract for services. PAYE was not operated and he was regarded as self-employed and had no holiday entitlement. He had a limited choice as to what work he should undertake, and as to the hours that he worked. As a very experienced worker with detailed knowledge of the hotel's infrastructure, he needed little supervision. This had also been the case during his period as an employee before his retirement. In the same way as he had done while an employee, B provided his own tools; a number of which were kept at the hotel. For purchases of goods, B either used his own credit card and was later reimbursed by the hotel, or the purchase was in the name of the hotel. B issued invoices in respect of each period worked. On occasions, he carried out a small amount of work for other persons. B reported his earnings to HMRC on the basis of being a self-employed individual, and paid tax accordingly. Following an employer compliance visit, HMRC concluded that B should be treated as employed rather than self-employed. Determinations were issued to collect PAYE and Class 1 NIC, which HMRC deemed should have been deducted.

It was held by the Special Commissioners that Mr B’s status after his retirement remained that of an employee. For a person previously engaged as an employee to become an independent contractor working for the former employer, there had to be a clear distinction between the employer/employee relationship and the new one amounting to a contract between client and independent contractor. B's engagement, subsequent to his retirement, was very similar to that of his former employment and, taking all factors into account, B’s status remained that of an employee.

NOTE: An important side issue arose in the Demibourne case, namely, the issue of where tax/NIC has been paid by an individual as self-employed, but the engagement is re-classified as employed; so, effectively, the tax/NIC has been paid by the wrong legal person. For further details, please visit http://www.accaglobal.com/uk/members/technical/taxation/guidance/status

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