Are you a self-employed PA/carer?

The ‘Personal Assistant Employment Status’ report is an important and interesting report and we were pleased to share our technical knowledge of this area of the tax system with the authors as part of their research for the report. Its publication also gives us a great opportunity to set out a few things that PAs who are being treated as self-employed should be aware of.

Your status

Although we know that there are a lot of self-employed PAs out there, in our view, most PAs are unlikely to be genuinely self-employed if the status tests are applied to the facts correctly. If people are treated as self-employed when the facts suggest that they should be treated as an employee, then we refer to this as ‘false’ self-employment.  You can read more about the status tests in our factsheet.

People often assume that you can choose to be self-employed – because it suits you better or because it suits the person you are working for. That is not the case, it depends on the actual facts and circumstances of the situation.

Right to substitution

As you will see, one of the key status tests is the right to substitution. We think that some of the ‘false’ self-employment out there may be down to confusion around how to apply this test.

A key hallmark of self-employment is that the self-employed person usually has the unfettered (or unrestricted) right to provide a substitute of their choosing to complete the job in his or her place. For example, this would mean if you were ill or have another client to see at the same time, you could send someone else in your place. Yet due to the very personal nature of your relationship with your client, it may not be appropriate for you to be able to send someone else in your place if, for whatever reason, you are unable to perform your duties.

In addition, for unfettered substitution, we’d broadly expect the following:

• Your client cannot give permission, ‘vet’ or in any way restrict who you send in your place.

• The substitute PA isn’t someone from a pool of workers regularly used by your client. 

• The substitute PA isn’t interviewed or subject to any form of selection process, other than confirming they’re qualified to undertake the role.  

• You mustn’t require written permission from your client to provide a substitute - you must have free rein to replace yourself as and when you see fit.  

• You must pay the substitute PA yourself (rather than the client paying them directly).

If any of the above don’t apply, it’s likely that the right to provide a substitute is fettered. In reality, this means there is no right to substitution.

Although this is just one of the status tests to be considered, if there is no unfettered right to substitution it is quite hard for the PA to be genuinely self-employed.

HMRC’s view

HMRC’s guidance in relation to care provided in a client’s home, set out in the  Employment Status manual, says that although most PAs that look after someone in their own home are likely to be employees…’on occasions the facts may indicate self-employment. For example, it may be the case that a care worker looks after a number of people concurrently and has a business organisation in place.’

This means that it is not impossible for a PA to be self-employed but it is likely to be the exception rather than the rule. We give an example of a self-employed PA in our factsheet.

It is worth saying at this point that you may have been a genuinely self-employed PA previously or know some genuinely self-employed PAs. However, just because other PAs you may know or work with, are genuinely self-employed, that doesn’t mean that you are. It will depend on the actual facts and circumstances of your situation – and on a case-by-case basis.

Why are there so many self-employed PAs then?

There are lots of different factors driving the number of self-employed PA arrangements, for instance:

• In our experience, there is often a misunderstanding in the care sector (and indeed in other sectors) that status is a matter of choice. As noted above, status depends on the facts.

• There is also an unfortunate lack of understanding of status issues by those administering Government funding like direct payments to disabled people who might use it engage a PA or carer like you.

• It can be difficult to determine status in the care sector. This is because naturally the lives of PAs and their clients tend to be more closely intertwined than in other sectors where the boundaries between employer/employee or engager/worker are more clearly demarcated. This means it is also harder to use the tools that are available to assist in determining status.

• The idea of self-employed PAs seems to fit more intuitively in the social and health care space, where self-employment reduces the costs and obligations of taking someone on. For example, it helps with  the administrative burdens facing disabled people who want to assert choice and control by taking on their own PA; it also makes their money go further.

• In addition, we know PAs sometimes want to be self-employed because they think they will be better off. But this can sometimes be an oversimplification as we explain in our ‘mythbusters’ section of our factsheet.

• Many introductory agencies have sprung up to ‘facilitate’ the introduction of self-employed PAs to disabled people.

• There is little, if any, compliance activity from HMRC in this space, meaning there is a lot of ‘perceived compliance’. What we mean by this is that it is natural for people to think that if self-employed PA arrangements were not right HMRC would have already stopped them, and as they haven’t, it must mean that they agree with the status quo!

Because of all the factors above, self-employed arrangements are becoming more and more common and in some locations, may even be the ‘norm’. This then feeds into the perceived compliance issue described above and the cycle then continues. 

Risks to PAs of false self-employment

If you are in false self-employment, your wages are not subject to Pay As You Earn (PAYE), as they should be. Although it is the responsibility of the person you are working for to decide your status properly for the purposes of operating PAYE, in some instances HMRC can direct that some of the money owing (as a result of the incorrect status and non-operation of PAYE) is recovered from you.

PAYE is supposed to alleviate the burden of individual workers having to declare their earnings to HMRC via the Self Assessment system. We know that people can easily fall into non-compliance when trying to navigate the complex Self Assessment system and this can have longstanding ramifications. This is another consideration for self-employed PAs.

If you are being treated as self-employed incorrectly for tax purposes, then you may be being treated incorrectly for employment law purposes too and may be missing out on some rights. You may also be in more of a vulnerable position in terms of working in a private house for someone that may not hold employer liability insurance etc.

Another complexity!

Even if you are a genuinely self-employed PA, please note that if you are coordinating with other PAs to schedule work or to arrange cover when you are otherwise unavailable, then this could make you an ‘employment agency’ under the Employment Agency Act 1973. In this case you would be under the regulation of the Employment Agency Standards Inspectorate (EAS), as you are providing information to other persons with a view to them finding work. There could be knock on consequences in terms of potentially falling outside of the ’PA exemption’ and needing to be registered with the Care Quality Commission (CQC). You may wish to consider seeking further advice from these bodies to understand your obligations.

Why is it so difficult?

Good question!

We think the report, and all of the above points, expose the lack of any real coordinated effort from the authorities concerned (HMRC, EAS and CQC) to understand the landscape.

There is a subsequent lack of good, tailored, holistic guidance for PAs or disabled people to understand the position, which we think is the bare minimum required to support the sector. In reality, the various systems and their interactions are imperfect and there is probably the need for a much simpler, joined up approach. It seems to us that better-coordinated policymaking all round is required as a longer term goal.

As such we echo the call in the report for ‘the Department of Health and Social Care (DHSC) to consider working in collaboration with the regulatory authorities, HMRC, EAS and CQC to support a better understanding of employment status and its application in this sector. We offer our support and willingness to contribute to that piece of work’.

Call for evidence

In the meantime, the Director of Labour Market Enforcement has issued a call for evidence which sets out the issues that she is looking into as part of her 2024/25 strategy. The care sector is highlighted as a high risk sector. If you would like to tell her of your experiences working as a PA in the care sector, whether good or bad, there is a survey available to complete which is open until the 8 September 2023.