Self employed freelancers can be a tax problem waiting to happen. If the tax man decides they should have been treated as employees, he will ask you for the PAYE and NI you ought to have deducted from their wages plus employers NI. The tax man can go back 6 years. Once the tax man follows this line it is up to you to prove he is wrong.

The classic solution is to tell your freelancers that you will only work with them if they work for you via a limited company. However IR35 rules can bite where a freelancer provides services under a contract between you and an intermediary (the limited company) where but for the existence of this entity they would have been an employee.

Documentation which does not include phrases that give the impression they the freelancer is under your control and does not give certainty of continued work, allows the freelancer to substitute an alternative person and does not give the freelancer any rights such as holiday pay, sick pay, minimum working hours or set hours, pension etc is essential.

You should make sure that the facts stack up too – for example the freelancer should not be included on internal staff lists, phone lists or attend staff entertainments (other than as a separately invited guest). If the freelancer is working as part of a team record that this is so staff can learn from their expertise.

Tax is a complicated area and each case is different so you should speak to your professional tax advisor and not rely on the above information.