Risks of engaging a person to work via their personal service company
The tax risk under IR35 is the individual’s burden. However, there is always an employment status risk when purporting to be in a business-to-business relationship with a company providing an individual when that individual is in situ at an office side by side with actual employees. The case law shows that an implied employment relationship could arise, which would affect how you could in future end the engagement and in turn your business’s liability.
If you’re intent on going down this route, you need to ensure that you do not treat the individual in question as an employee. In particular, avoid:
- Sending group emails to staff which include him or her
- Referring to him or her as an ‘employee’ or ‘member of staff’
- Regulating his or her working hours excessively
- Requiring employee-style holiday requests from him or her
- Giving out employment-style documents to him or her, such as an employment handbook
Also, make sure that the individual renders invoices for services, just like any other supplier.