Opportunity to Profit
A typical Freelance Professional has taken the decision to migrate from the security and benefits of employment and to make the move to contracting as a career, accepting and managing the resultant risks associated with being self employed. These risks include providing your own insurance, being aware that you may be without hirers for extended periods, and having to run and administer your own business. This could reasonably be argued that by doing this alone you have already taken advantage of a significant opportunity to profit from sound management.
Selecting the correct assignments, and anticipation of future skill requirements coupled with training as necessary to be able to meet such requirements, may also be examples of ways in which there is opportunity to profit from sound management.
You should think about the management of your business expenses. Managing expenses appropriately will have a bearing on your business’s profitability.
It is also arguable that the opportunity to structure one’s affairs by negotiating Pass IR35 contract terms where it is appropriate and correct to do so could properly regarded as opportunity to profit from sound management. Doing so would appear to be management, and it offers opportunity to profit from doing so.
Case law suggests:
- if a worker has significant opportunity to profit from sound management of the business as a whole, the relationship is likely to be self-employment;
- ‘opportunity to profit from sound management’ may mean either from management of the task itself, or from managing the business as a whole – the opportunity to profit from being good at what you do – and from building a reputation and a demand for your services, for which you can charge accordingly;
- if a worker can increase his net earnings he may be self-employed, but other factors need to also be considered; this may be a pointer towards self-employment, but not necessarily conclusive in itself; and
- it may be unlikely for the relationship to be self employment if there is no opportunity to profit from sound management.
An employee’s income will depend on performance when paid by the piece. It could also depend on how long he or she works and that, in turn, could depend on outside factors such as the weather.