ESM11150 - Check Employment Status For Tax: Worker's contracts - Ownership rights
CEST asks users to consider whether any assets are created or used during the contract. This could include intangible assets, such as intellectual property.
Where a worker retains ownership of assets they have created during a contract or sells them to the hirer once the work has completed and outside of the original contractual arrangements, this is an indicator that the worker is running an independent business. Similarly, if ownership and/or the ability to exploit such assets sits with the hirer then this is more indicative of an employment relationship.
CEST asks: ‘Are there any ownership rights relating to this contract?’
If during the contract the worker creates an asset that the worker or hirer can make a profit from, then this would fall within the ‘Yes’ category for CEST. To fall within the ‘Yes’ category an asset simply needs to be created. For the purpose of this question, it is not important who may be able to exploit that asset for profit as that is addressed in a separate question.
If during the contract no assets are created, this would fall within the ‘No’ category for CEST.
EXAMPLE
- Kerry is a content writer for books for children. The books are protected by copyright and are sold nationwide. This copyright is an intangible asset which someone can own and make a profit from.
- Steven is a receptionist at a car dealership. He speaks with customers and suppliers and ensures the servicing department carries out their services on time. This role does not involve the creation of assets so there are no ownership rights involved.
CEST asks: ‘Does the contract state the rights to this work belong to your organisation/the hirer?’ or ‘Does the contract state the rights to this work belong to your client?’
If any of the ownership rights created during the contract stay with the hirer, and a worker does not have any opportunity to own any rights, then this would fall within the ‘Yes’ category for CEST. A worker would not be able to exploit the work because the rights did not belong to the worker from the outset.
If a worker has some say in what happens to the ownership rights, which means they may be able to receive further payment for the rights, then this would fall within the ‘No’ category for CEST.
EXAMPLE
Kerry is a content writer for books for children. The books are protected by copyright and are sold nationwide. This copyright is an intangible asset which someone can own and exploit for profit.
- If as part of Kerry’s contract the hirer will own the rights, so she has no option to make further profit from these rights, then contractually the rights belong to the hirer.
- If Kerry has the option to sell those rights to the hirer or Kerry can keep the rights and exploit then under different engagements, then contractually the rights don’t belong to the hirer. This will be the case where Kerry merely licences the rights to the hirer.
CEST asks ‘Does the contract give your organisation/the hirer the option to buy the rights for a separate fee?’ or ‘Does the contract give your client the option to buy the rights for a separate fee?’
If the rights do not belong to the hirer under the contract but the hirer has the option to buy the rights for an additional payment, this would fall within the ‘Yes’ category for CEST.
If the rights belong to a worker and the hirer does not have an option within the contract to buy the rights, this would fall within the ‘No’ category for CEST. A worker may still sell or licence the rights to the hirer, but this would be entirely separate to the contract and negotiated as a different transaction. A worker in this instance could exploit the rights with whomever they wish.
EXAMPLE
Kerry is a content writer for books for children. The books are protected by copyright and are sold nationwide. This copyright is an intangible asset which someone can own and exploit for profit.
- If the contract stipulates the hirer may purchase the copyright from Kerry for either a certain fee or an amount negotiated with Kerry, then this is the contract giving the hirer the option to buy the rights.
- If there is nothing contractually giving the hirer any right to buy the copyright from Kerry, then Kerry can exploit the rights in any way she wishes. She could sell them to the hirer or to another person, it is entirely her choice. The contract does not give the option for the hirer to buy the rights.