Whether you’re thinking about setting up your own equestrian business, or you’re a seasoned owner of a livery yard or stable, there’s more to working in this specialist industry than just a love for the sport.
One area that’s crucial to stay on top of is your finances, especially the taxes and regulations that could apply. For many equestrian businesses, one of the biggest questions that arises is the status of the different people that work for you in the yard.
From grooms and stable hands, to admin support and instructors, from the very beginning it’s important to consider whether you’re taking them on as an employee, or as a self-employed person, especially when it comes to taxation.
Employment v self-employment
In the UK, self-employed individuals do not have a right to a number of protections and allowances, including the right to paid holiday, the right to statutory sick pay and maternity or paternity leave rights, however some discrimination and health and safety protections still apply. Self-employed people are also not paid through PAYE.
As an equestrian business owner, you may think that you would only want to use self-employed workers to avoid the financial commitments and responsibilities of employing people, but then you may also find you experience other issues, such as availability of staff during busy times.
It is essential that both parties are clear from the very beginning about the nature of the working relationship, as the consequences when it comes to taxation will fall to you, the employer.
Problems can arise if an equestrian business owner is treating workers as self-employed, when those individuals have not registered their self-employed status with the HMRC, and there is not a clear contract in place between you and the worker.
If you treat them as self-employed, for example after spending a few hours mucking out, or helping out on hacks or in the school, they’re given cash in hand when the work is done, without clarifying their status, there could be serious repercussions.
HMRC, or even the individual themselves, may have grounds to establish that they are in fact an employee of the business, in which case, you would be liable for any underpaid PAYE tax and national insurance contributions, not to mention late payment interest and penalties.
There are two ways this inaccuracy could come to light – either from the individual themselves raising it after termination of contract (for example, if they wished to claim unfair dismissal), or HMRC may conduct a PAYE audit (often the more likely scenario).
Aside from the financial cost of HMRC making this decision, if they conclude that individuals are being treated as self-employed when they’re actually employed, the business will remain under close scrutiny for years to come, so it’s definitely worth being 100% sure where you stand!
How can I tell if workers are employed or self-employed?
There are some simple checks you can make as an equestrian business owner to ensure the status of your workers is clear.
We strongly recommended that you don’t only take the word of your workers – by carrying out reviews and checks yourself, you protect both your business and the individuals involved.
HMRC publishes lots of helpful guidance on their website to help you establish whether someone is employed or self-employed. There are some key questions to ask about each person, some of which we have outlined below (please note this is not an exhaustive list)…
If you answer ‘yes’ to these questions, the individual is probably employed:
- Do they have to do the work themselves?
- Can someone tell them at any time what to do and how to do it?
- Do they work a set amount of hours?
- Can someone move them from task to task?
- Are they paid by the hour, week, or month?
If you answer ‘yes’ to these questions, the individual is probably self-employed:
- Can they hire someone to do the work or engage helpers at their own expense?
- Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
- Do they agree to do a job for a fixed price regardless of how long the job may take?
- Can they decide what work to do, how, when and where?
- Do they have to correct unsatisfactory work in their own time and at their own expense?
How do your workers measure up? For many stables, yards and liveries, people who help out with the various tasks tend to fall under the employed category, so make sure you’re aware of the responsibilities that then fall to you, as their employer.
It’s worth noting that if there’s any doubt about an individual’s status, HMRC’s default is that the person is employed.
There’s no doubt that running an equestrian business is really tough at times, but it can also be incredibly rewarding, and a real privilege to earn a living doing what you love.
As accountants who specialise in supporting equestrian businesses, we want to ensure you have all the information and support you need to be able to focus on the work you’re passionate about. Get in touch with the team to find out more.