14 October 2009
Last month a disabled grandmother received a tax bill for £35,000 for unpaid employers’ tax and national insurance in respect of her full-time carers.
The disabled claimant, Sarah Rose, had made all her carers self-employed in 2003 and they had agreed to pay their own tax and national insurance. However, Her Majesty’s Revenue and Customs do not accept that the arrangement was lawful and are pursuing Ms Rose, who has MS, for unpaid tax.
We asked our resident barrister, Holiday Whitehead, where the law stands on the issue of self-employed carers.
I do have a great deal of sympathy with Sarah Rose and the predicament she finds herself in. Unfortunately this is only one of many potential difficulties disabled people engaging their own carers may encounter and is an example of the many imperfections of the Direct Payments system.
I appreciate that for many disabled people employing their own staff is empowering and gives them far more certainty and control about the care provided, but Ms Rose’s case is by no means untypical of the type of pitfalls that open up for a disabled person in this position.
What many people do not seem to fully understand, or more importantly, are not adequately advised about, is that in engaging their own carers in their own home, to provide personal services to them at set times for a set wage, they will almost certainly create an employment relationship. As employers, disabled people are subject to the same statutory regulations related to tax, national insurance, health and safety and employment rights as any other employer in the UK. There is no small employer exemption or special rules that they can claim protection under.
Unfortunately, what Ms Rose seems to be unaware of is that employment status for tax and employment law purposes is subject to clear legal principles laid down in case law that are used to decide the status of workers.
HMRC issue information in leaflet form and on their website detailing how to identify whether a worker is employed or self-employed. If one refers to this information, and particularly the list of questions about how the worker carries out the work, it seems quite certain that Ms Rose’s carers would be treated as employed for tax purposes.
This is because of the close personal nature of the services they provided, the fact that they worked in her home, took instructions from her with regard to the way they delivered the services and were expected to provide the services in person and at regular times.
Similarly, under employment law the test of employment status looks at, among other things: the nature of service provided; whether they are expected to carry out those duties regularly in person; where those duties are performed; what equipment is used and who it is provided by; whether they are paid a set wage at regular intervals and whether there is a right to terminate the service giving a specified length of notice.
Again, if this test is applied, it does seem very likely that the carers would be treated as employees for employment law purposes and therefore Ms Rose would be an employer.
I am interested to note that the details reported of this case state that Ms Rose claimed she “made all her carers self-employed” in 2003. This suggests that Ms Rose may have originally employed her carers and then attempted to change their employment status. It appears, however, that she may not have obtained professional advice about this important and complex step.
I do find it difficult to envisage a situation in which a personal carer with whom a disabled person has an ongoing relationship and dependency, who is working in their own home and not provided by the local authority or an agency, could ever legally be considered as self-employed.
If you are contemplating what I consider to be the - legally - extremely complex responsibility of following the direct payment route to funding personal care or you are considering changing the employment status of your carers from employed to self-employed, think very hard indeed about the implications of that decision and please, please, get legitimate professional advice.
By legitimate and professional, I do not mean the social services department of your local authority.
As I stated above, this type of problem is only one of a variety of potentially serious issues that can arise for disabled people engaging carers themselves. Indeed, I have been involved in my professional capacity in a number of cases that have resulted in Employment Tribunal (ET) applications against disabled employers .
In one such case, the disabled person had moved into full-time residential care and his carers had applied to an ET on the grounds that they had not received their full redundancy entitlement. What was particularly disturbing in this case was that both the disabled person and the carers failed to understand who the employer actually was. The disabled person thought that the local authority was still the employer, the carers thought that either the disabled person, the local authority or the organisation providing payroll services and paying their wages might be their employers. As a result, all three were named on the ET application.
As for Ms Rose, I do wish her well. If she did get advice from her local authority social services department or another agency about changing the employment status of her carers, she may wish to consider the legal accuracy of that advice and the legal liability of those providing it.
The full story is in the Lincolnshire Echo