Tribunal Case – Employment status
The first tier tribunal had to decide whether a ‘worker’ who had brought unfair dismissal proceedings against his ’employer’ was an employee or self-employed for tax purposes. The case concerned the employment status of the ‘worker’ as assistant manager in a fitness club. The ’employer’ was disputing liability for a little under £7,500 of PAYE and NI charged in respect of 2003-04 and 2004-05.
The case was before the tribunal following an agreement in which the ’employer’ and ’employee’ had agreed a settlement in respect of the "employee’s" claim for unfair dismissal. The settlement agreement clearly stated that the worker was an employee. Following this agreement, HMRC issued regulation 80 determinations and a notice of decision for Class 1 contributions. The managing director of the taxpayer company argued that the term ’employee’ should not have been included in the agreement and that she had been ill when the settlement had been agreed.
The tribunal took the view that the settlement agreement whilst not binding on the tribunal carried significant weight and explicitly detailed the tax liability of the ’employee’ and made it clear that the taxpayer company was an ’employer’. The tribunal also examined the wider aspects of the worker’s role as assistant manager. The taxpayer company retained ultimate control and the pattern of an employer/employee relationship could clearly be seen. The tribunal also found that the worker did not bear any risk of financial loss.
The Tribunal also noted that the original intention of both parties was that the individual would be self employed which is why he invoiced the ’employer’ company monthly and why no PAYE system was in operation. Ultimately however the tribunal found that the worker was an employee of the company for PAYE and NI purposes. The tribunal therefore dismissed the taxpayer company’s appeal and confirmed the sums due.