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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: working the case: informal interactions with third parties

During a compliance check you may need to gather information from workers, end clients or other intermediaries involved in the contractual chain. Other intermediaries could include agencies and umbrella companies, see SIOG6500 and SIOG6200 for further information.

If you wish to approach an end client or other intermediary which comes within large business (LB), you must first contact the Customer Compliance Manager (CCM).

Were it is necessary to undertake informal discussions with others involved in the contractual chain, we call these third party meetings.

One reason to approach a third party would be were the behaviour of a business is affecting others in the contractual chain. In such cases it will be necessary to approach the third party to tell them the potential effects on them. For example:

  • you may be considering whether the Agency Regulations (Section 44 ITEPA 2003) apply to an agency in the contractual chain
  • an engager may have changed the status of a worker
  • you may wish to follow through transactions which could involve the fraudulent evasion of VAT.

You will need to act in a way that gathers the information that is necessary to advance your enquiries but also:

  • does not breach confidentiality
  • is transparent in what you are doing
  • reduces the impact of your check on any party you may wish to contact.

You must not contact a third party as a matter of course. It must be proportionate given the facts of the case. You must keep a clear audit trail in the case papers showing why you consider third party enquiries to be necessary.

The guidance below sets out HMRC best practice for gathering information from workers, end clients or other intermediaries. It reflects HMRC’s Litigation and Settlement Strategy, see CH40000. If the approach below is not appropriate in your case, you must discuss the case with an authorising officer. The authorising officer must agree any alternative approach you take.

What to tell the business
Your approach to workers
Your approach to end clients and other intermediaries

What to tell the business

When you decide to approach workers, end clients or other intermediaries you must tell the business of your intention at the earliest possible stage of your check. You must:

  • tell them that you intend to approach workers, end clients or other intermediaries, without necessarily naming the workers, end clients or third party
  • tell them why you think it is necessary
  • reassure them that your discussions with third parties will be general and focussed only on their contractual relationship with them
  • reassure them that any contact with third parties will be handled carefully in order to minimise any impact on their relationship with them or on the wellbeing of employees
  • tell them that you wish to work with the business, so that information gathering is structured and appropriate
  • tell them how you will approach the third parties, for example by letter or phone call. You may:

    • choose to share the standard letter or basic questions you will use
    • explain how you have chosen which group of third parties to approach.

Note: You need to be careful not to name the third parties but you can advise them of how you selected the sample, for example you randomly selected third parties from all locations.

You do not need to have a letter of authority from the business before approaching third parties.

You must not allow the business to arrange meetings on your behalf.


Your approach to workers

When selecting a sample of workers to interview you must be able to demonstrate that your sample is:

  • randomly selected and
  • represents a cross section of the whole workforce in terms of duties undertaken, length of service, location.

You should not accept random samples suggested by the business.

When you approach a current or former worker of a business you should normally name the business. This is not a breach of confidentiality. You must not indicate that the business is under enquiry. Rather you should explain that these are routine queries which HMRC makes on a regular basis.

You should write to the worker advising them of the purpose of the meeting using the standard letter ITP01 Inviting worker for interview available in SEES.

For further guidance on interviewing workers in status cases, see COG907550.


Your approach to end clients and other intermediaries

When you wish to approach an end client or other intermediary which comes within LB, you must first contact the Customer Compliance Manager (CCM).

The agreed protocol between LB and FIS is available on the Civil Fraud and Avoidance page and a list of CCMs are accessed from the CCM contacts page.

When you approach an end client or other intermediary for information you should, where possible, not name the business. This may not always be possible, for example the information required only relates to one business or intermediary.

At the meeting you should:

  • ask questions to establish if there are any differences in their interactions with different businesses, intermediaries
  • select a sample of the businesses at random, which they have mentioned, and talk through in more detail unless the circumstances mean that you have to name the business. (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  

If following the meeting you need specific information you should either:

  • issue a third party Schedule 36 Notice approved by a Tribunal or
  • ask the business under enquiry to give its authority for us to approach the Third Party to obtain the information, see CH23600.

Standard letters to end clients (ITP03 - Letter to end client) and other intermediaries (ITP02 - Letter to agency) are available in SEES>Local Compliance>Intermediaries and Third Parties.