Financial risk and opportunity to profit from sound management are two sides of the same coin. The self-employed person is more likely to be subject to financial risks than the employee, but the self-employed person normally has more opportunity than the employee to profit from sound management of the work.
A good example of financial risk that HM Revenue & Customs will acknowledge is a fixed-price contract. Undertaking a piece of work for a fixed fee, irrespective of the time taken or the amount of work done, provides the worker with both a financial risk (if the work takes longer than expected) and an opportunity to profit (if the work is done quicker or cheaper through sound management of time and resources).
Other examples of financial risk are as follows:-
- The provision of your own equipment, office facilities, manuals and training.
- Having to indemnify the client against losses or damages due to your negligent acts or omissions.
- Being obliged to correct defective work at your own cost.
- Having to provide your own insurance cover, e.g., Professional Indemnity, Public Liability and Employer's Liability.
Qdos Consulting can offer additional advice on any of these subjects.