I didn’t intend to write a long post, but it’s a complicated situation. I write from the experience of employing live-in carers (about 70 different individuals in total over 10 years) ceasing 16 months ago when my mum died. I appreciate that the law may be changing, but I stand by my description of how our agency live-in carers worked for multiple clients and justified their self-employed status. I accept that not all carers are truly self-employed, but ours were.
I know that some of our carers had to argue their case with HMRC, with the assistance of their accountants’ records, to prove that being employed rather than self-employed was not appropriate or practical for them. A carer can have 20-40 separate bookings in a year. Currently, it is perfectly lawful for someone to actively choose to be self-employed provided that they comply with the tax requirements for this. HMRC should go unchallenged in waging war on genuine self-employment. They aren't worried about the poverty and suffering in the gig economy. They just want to crack down on tax dodging.
The agency we used acted as an introductions agency, matching the client needs to the carer skills, experience and temperament. Although the rates of pay and other terms and conditions were set by the agency, the booking engagement was always entered into voluntarily by client and carer. Both parties had the right to refuse or to terminate the booking early if things were going badly. As the client’s representative, I paid each self-employed carer gross for the days they had worked and it was then their responsibility to deal with NI and tax.
After a few years I hit a stumbling block when HMRC put pressure on the local authority (who were providing my mum with some Direct Payments funding). They had thoroughly frightened the Direct Payments Team at the LA by coming in all guns blazing to a training seminar. I don’t deny that for many carers and clients the relationship was indeed one of quasi-employment. HMRC was right to recommend that those in receipt of Direct Payments funding should be assisted by the LA to become employers where appropriate. However, HMRC’s training team had told the LA that ALL carers were employees and could NEVER be self-employed.
This is an OPINION not a fact in law, and it can be challenged! Otherwise, there would never be anyone who could be self-employed if they offer a personal service to clients. What about the podiatrist, or the hairdresser? There must be circumstances where HMRC will accept that a person has a portfolio of clients, whether regular or not, and IS self-employed. As with other self-employed people, our carers were responsible for their own professional development, undertaking regular training courses via the agency or elsewhere, which they paid for themselves. The client benefited from the training but was not involved in organising it or deciding what was needed.
I was eventually able to argue successfully that I was not the employer, with the assistance of a letter from the agency. They confirmed that the contracts of both clients and carers with the agency expressly forbade the employment of carers by the clients to whom they had been introduced by the agency. Any breach of these terms incurs a hefty penalty fee from the agency.
Then the LA said, in further effort to cover their backsides with HMRC, that although they were satisfied that my mum’s carers were self-employed in our case, I was now being required to scrutinise the tax records of all the carers in advance to prove that they had been paying their taxes! I argued that the proposed requirement would be highly inappropriate because I would have had to ask for sight of ALL their confidential earnings information including details of their other clients, who were by definition vulnerable adults. The proposed requirement was also impossible to achieve on practical grounds. Here are some of the reasons for this:-
- Carers keep their personal papers at their home address, or with their accountant. They don’t carry them around in their suitcase from client to client.
- Even if I had managed to get sight of this information from regular carers, our bookings frequently changed at short notice due to substitution of a booked person for someone else.
- Some carers lived in EU countries not in the UK so flew in and out for their bookings, and some worked for several months of their year in the UK but were permanently resident in South Africa. These carers are entitled to opt to pay tax in their country of residence, not in the UK.
It’s not a straightforward one size fits all situation, whatever HMRC would have liked to insist. My compromise with the LA was that I would only engage carers who provided me in advance with their UTR and written confirmation of being registered with HMRC as self-employed for tax purposes. Without this compromise my mum would have lost £14K per annum in funding. I could not absolutely prove that the carers were paying the right amount of tax, but by supplying the LA with the UTRs they would be able to show HMRC that they had done as much due diligence as was possible in the circumstances.