ESM1001 - Detailed guide to determining status: introduction

In the great majority of cases it is quite clear whether someone is

• an employee, office holder or agency worker chargeable to tax under Schedule E/on employment income and liable for Class 1 NICs, or
• self-employed and chargeable to tax under Schedule D and liable for Class 2 and Class 4 NICs.

In such cases there will usually be no need for any enquiry or action on the part of HMRC. But there are some difficult areas on the borderline which may need detailed enquires.

We have a public commitment, set out in leaflet IR56 'Employed or Self-Employed', to provide guidance and if requested, a written decision, on employment status. The Status Inspector may therefore have to consider the NICs and tax status of an individual or group of workers in cases such as the following

• an engager requests guidance about the need or otherwise to operate PAYE
• a worker asks for a decision on status
• a review of forms CWF1
• HMRC suspects that the claimed status is incorrect (for example on receiving a form CWF1 or on examining a set of accounts)
• compliance officers involved in a review ask for an opinion on the status of a worker or group of workers.

Most Status Inspectors will be part of the new Employer Compliance Unit structure and their role is set out in the Employer Compliance Handbook.

The following sections of this part of the Employment Status Manual provide the Status Inspector/ with sufficient detailed guidance to enable him/her to be able to reach a decision on the status of workers in the vast majority of cases.