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Record keeping (part 3)

Updated 15 December 2023

Read Purpose, scope and background (part 1) of these guidelines, if you have not already.

You should read these guidelines alongside existing off-payroll working guidance. They are not designed to be used in isolation, or to create an end-to-end process for organisations to comply with the rules.

Your organisation should apply the guidelines to reflect the complexity and scale of your own off-payroll working engagements. Use these guidelines to help make informed decisions, based on individual circumstances.

Who needs to keep records

Your business needs to keep detailed, up-to-date records on all of your engagements where you have considered the off-payroll working rules.

These records should show how you have considered and operated the off-payroll working rules. The need to keep records applies to:

• the client
• the deemed employer
• an agency supplying workers to a client
• an agency supplying workers, as part of a supply chain, to another agency contracting directly with the client
• a worker’s own intermediary

What records to keep

The records you need to keep will depend on where your responsibilities lie in operating the off-payroll working rules.

These lists are not exhaustive. You may need to keep additional records to support your systems and processes, depending on the complexity of your organisation.

If you’re the client

If you’re the client, you’ll need to keep records of the following.

Communications with other parties

You’ll need to keep records of:

• the gross fees paid to the party you contract with
• communication with third parties you contract with, to establish whether workers they supply should be considered under the off-payroll working rules — this could include:
  • confirmation from third parties as to whether the worker is providing their services through their own intermediary
  • evidence of all checks carried out to satisfy yourselves that workers have had PAYE operated on their income, if it’s determined that the off-payroll working rules apply

You’ll also need to consider if you are the client, or if a service is fully contracted out for the purposes of the off-payroll working rules. You’ll need to record your decision and any evidence you used to make it.

Determinations

You’ll need to keep records of all the employment status determinations you make, or that are made on your behalf by a third party, including:

• where you’ve decided an eligible worker is not within the off-payroll working rules
• the reasons for the determination and any relevant information to support how the questions were answered
• the status determination statement, including the output from any tool you use for this purpose (for example, HMRC’s Check Employment Status for Tax (CEST) tool)
• evidence of passing the status determination statement to the worker you engaged and the organisation you contract with, if another organisation in the labour supply chain is the deemed employer

Disagreements

You’ll also need to keep records of any disagreements about your determinations, including:

• the date you received the disagreement
• the supporting documentation received
• the outcome of the disagreement, regardless of whether the status has changed or not — including any new determination from CEST (or another tool you have used)
• when you shared the outcome of the disagreement

If you change the determination, you’ll need to record evidence that you have passed on the new status determination statement to both:

• the worker
• the person or organisation you contract with, where relevant (the next party in the supply chain)

Good practice

It’s good practice for clients to keep a record of all contractors engaged who provide their services through their own intermediary, regardless of whether you determine the off-payroll working rules apply. You should record:

• the full name of the worker
• the name of the worker’s intermediary
• the company registration number (CRN) of the worker’s intermediary
• the worker’s National Insurance number, if known
• the start and end date of each worker engagement
• any payments made
• the tax period in which the engagement took place

If you’re the deemed employer

You will need to keep records of: 

• information received from the worker, or their own intermediary, to confirm whether their own intermediary meets the requirements to be considered under the off-payroll working rules (read HMRC internal manual ESM10022 for more details)
• the status determination statement (received from the client)
• the chain payment calculation
• the deemed payment calculation
• any expenses which have been allowed against deemed direct payments, and supporting evidence of these expenses
• benefits that the worker has received as a result of the engagement

If you are also the client, you may already hold some of these records.

Read more about record keeping for employers operating PAYE and payroll.

If you’re an agency in the supply chain

You should keep copies of any status determination statements you have cascaded down the supply chain.

This should include records of:

• the date you receive the status determinations statements
• the date you cascade the status determination statements
• any fees received
• any fees deducted by the agency for the purposes of the chain payment calculation

If you’re working through your own intermediary

You should keep details of any engagements you undertake through your own intermediary as part of your Self Assessment records.

Why these records are important

These records will help you:

• show that you are meeting your statutory requirements, and that you have robust decision-making processes in place to operate the rules correctly
• during a disagreement process, if a worker or deemed employer disagrees with the status determination statement you’ve provided
• to ensure that HMRC can see that you’re taking the right approach when operating the rules
• as the client or deemed employer, to potentially account for taxes already paid by a worker and their intermediary, if we undertake a compliance check and find you have incorrectly determined a worker as outside the rules

How long to keep off-payroll working records

You must keep PAYE records if you’re a deemed employer. You’ll need to retain these for 3 years, from the end of the tax year they relate to.

Read more about record keeping for employers operating PAYE and payroll.

Your organisation will also need to keep records relevant to your company tax return for 6 years from the end of the last company financial year they relate to. You may need to keep them for longer, if:

• they show a transaction that covers more than one of the company’s accounting periods
• you sent your Company Tax Return late
• HMRC has started a compliance check into your Company Tax Return

Example of effective record-keeping

This is an example of where an organisation has kept and maintained effective records of their off-payroll workers.

An organisation ensures that all its workers are recorded on their HR work management system. This applies to direct employees, contractors or workers provided by third parties.

They need to do this so they can:

• issue security passes for the premises
• make payments to workers for their services

Their system records key details of all workers such as their:

• full name
• address
• start and end dates
• National Insurance numbers

Their system also records if the worker is providing their services through their own intermediary, the name and address of that intermediary, and any third party providing the worker’s services.

The organisation stores all documents relating to off-payroll workers in a specific folder.

These include the:

• worker’s contract
• documents in relation to their terms and conditions
• their status determination statement

The organisation also stores:

• communications with relevant agencies related to determining a worker’s status
• communications with relevant agencies, where the organisation has passed down a status determination statement
• any records regarding status disagreements between the organisation and the individual worker

Once a month, the organisation compiles a list of any workers with an off-payroll working identifier on their system. They cross-check the list against each worker’s individual folder, to make sure they’ve correctly captured all off-payroll workers.

If they find any workers that have not been captured correctly, they add them to the system. This might be because they’ve engaged a new worker during the course of the month.

This organisation receives a disagreement from a worker. The organisation checks the detailed records in their system and carries out a review.

To do this, they consider the reason for the disagreement against the information and evidence that led to their original status determination. 

Because of their robust record-keeping, they can uphold their original status determination, and give a detailed and evidenced reply to the worker explaining why. They then update the worker’s folder with the decision and all the related documents.

The records this organisation hold, and the systems in place for retrieving information enable the client to carry out their obligations to operate the off-payroll working rules efficiently and effectively.

The next section of the guidelines is Considering the requirements of a new role (part 4).