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HMRC internal manual

Debt Management and Banking Manual

HM Revenue & Customs
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Debt and return pursuit: PAYE recovery and associated processes: Regulation 72 (5) directions: Making a decision: status cases and Condition A

Employment status

The employment status of workers is governed by the terms and conditions of their engagement, and these determine whether they are employees under PAYE or self-employed. If there is doubt or disagreement about a worker’s status the matter is decided by a status inspector.

Usually, the status inspector is able to agree the tax status with the employer and/or the worker concerned. However, if a worker is ruled to be employed under PAYE but either the employer or worker does not agree to this, the status inspector should arrange to settle the dispute before the tribunal.

How status cases arise

Requests for direction by employers in status cases may be made following agreement by the employer that PAYE should have been operated on the payments made to the worker.

In order for Condition A to be considered the employer must accept that an employment exists and is now operating PAYE on the worker. If the employer does not accept PAYE should have been operated then it follows that the employer is unable to request a direction under the PAYE regulations. You should advise the employer in writing that you cannot consider R 72(5) Condition A because there is no acceptance that PAYE should have been operated at the time when the underdeduction arose.

If employment status is to be tested before the Tribunal (after any independent review) by way of an appeal against a Regulation 80 determination, do not be drawn into the status dispute or make any observations to the employer which may prejudice a disputed case where Regulation 80 Determinations have been issued.

Tell the employer that further consideration under R 72(5) Condition A is prevented by the provisions of Regulation 80(3).

If a direction under Condition A is formally requested in a status case, you should expect the employer:

  • to be familiar with employed/self-employed issues in order to reach a reasoned status decision at the time of the error in status
  • to have reached an objective rather than a self-serving decision
  • not to have repeated mistakes of the past.