What's the UK tax criteria about whether you are self employed or an employee?

I am looking to set up on my own, but my first client wants me to do a job over the next 2 years working around 180 days a year. I'm told there's a risk that the HMRC will consider that I'm an employee - but I don't want this to happen as I'm trying to get my business off the ground and get some more clients too (I've got 2 other very small clients). What are the criteria used to decide whether I'm genuinely self-employed or an employee? That way I'll make sure I do whatever I need to to get it right.

thanks

First thing to say is that it is not an exact science! However it is my experience that the status of an individual is employed if :

They have to do the work themselves.
Other people tell them at any time what to do, where to carry out the work or when and how to do it?
They work a set amount of hours.
They do the same tasks repeatedly and someone can direct them from task to task
They are paid by the hour, week, or month?
Their remuneration includes overtime pay or bonus payment?

But self-employed if:

They hire other people to do some or all of the work and take on these people at their own expense?
They put at risk their own money as part of their job/business?
They provide the main items of equipment they need to do the job.
They contract or agree to do a job for a fixed price regardless of how long the job may take.
They decide what work to do, how and when they do it and where They provide the service.
They regularly do work for a number of different people or organisations.
They have to correct unsatisfactory work in their own time and at their own expense?

The factor that I think is key here is if you do the same thing repeatedly for the same people, using their equipment and premises for a regular reward then you are employed.

Disclaimer:
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You are liable for the same tax rates whether you are self-employed or employed so I don't see the problem here. The only difference is if you are registered for VAT, in which case you charge your services out to the client with VAT added. That way you can claim VAT back on any stuff you need to do your job. Usually the two things more or less balance out though. Talk to an accountant.

--edit--

I am well aware that NI payments are lower if you are self-employed. But the question is not about NI. It's about tax. Hence I have answered regarding tax.

I think with New Labour the criterior is......
SCREW YOU FOR AS MUCH AS THEY CAN, AND THEN COMPLETELY WASTE IT ON GIVING THEMSELVES YET ANOTHER PAY RISE AND A MASSIVE BOOST OF THEIR OWN PENSIONS, BEFORE GIVING THE OTHER HALF OF IT AWAY TO OUR FORMER EUROPEAN ENEMIES.

Snetterton is missing the point - the self employed pay significantly loewer rates of national insurance (& receive significantly fewer benefits) and receive a more generous treatment as far as their allowable expenses are concerned. There is no one criterion that determines your employment status but it is based on the balance of probabilities taking into consideration all the circumstances of your employment. Have a look at www.hmrc.gov.uk/employment-status/index.... but bear in mind that this is HMRC's view and their intention is to coerce taxpayers into compliance and not indicate methods by which the legislation might be used to the taxpayer's benefit. Best of luck with your new enterprise.

There are 7 criteria used to decide whether you are employed or self employed. In my day they were called the 7 badges of trade. If you can answer NO to the following, you are probably an employee, although HMRC will look at the whole picture in deciding your status:
1. Can you send someone else to do the job you are being asked to do?
2. Are you risking your own money in that you could make a loss doing this job?
3. Do you have to put right any errors in your own time and at your own cost?
4. Do you have to supply your own tools/equipment?
5. Are you working in your own premises?
6. Are you working to your own price?
7. Can you work the hours and days that suit you?
It is the responsibility of the employer to decide whether or not you are an emplyee as he is liable for the tax and NIC if he gets it wrong.
The key test is NOT how many people you work for - thats a red herring. Many people have 3 or 4 part time jobs which are employment and many self employed people work for one or two 'employers'. The key is the quality of the relationship.

Basically, you tell HMRC if you are employed or self employed. However, you may wish to look at booklet IR56 for HMRC.

http://www.hmrc.gov.uk/pdfs/ir56.htm