ESM0501 - Guide to determining status: importance of fact finding

Where someone's status needs to be determined you must first establish the facts. It may be tempting to regard a shop assistant or secretary as so self-evidently an employee that there is no point in making enquiries. But where there is a dispute HMRC cannot simply assert that individuals are employees because of their job title.

The first time we may become aware that status is an issue is when a customer calls at an Enquiry Centre, or mobile advice centre, or Contact Centre staff receive a telephone call from someone claiming to have started in business as self-employed office worker, shop assistant etc. It is essential to have the facts to support the opinion reached. These are best obtained by having a face to face meetings with the parties to the contract. It is essential that you keep accurate original manuscript notes of the meeting(s) as these notes may be challenged at a later date. You must write up the notes of meeting within 24 hours of the meeting haven taken place and issue signed copies to the engager/worker/agent, inviting comment or agreement, within seven days. The notes of meeting should include the date and time they were written up and must be signed by all HMRC personnel present at the meeting.

If no response is received within 30 days you should issue a further copy of the notes with another request for agreement or comment.

It is only after the facts are established that the principles of general law can be applied and an opinion given on the person’s status.

Don’t forget that an office holder, for example a company director, is automatically chargeable under Schedule E/Part 2 ITEPA 2003 and liable for Class 1 NICs on any emoluments/earnings from that office – see ESM2500 onwards for more information on ‘offices’.

Where a case reaches the Commissioners, it will be for them to find the relevant facts.