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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: reasonable care in status cases

In making a decision to issue a direction in a status case you need to be sure that the employer took the following factors into consideration and there is some evidence.

  • Was the worker in business in their own right? Did the worker regularly perform work for other parties in a proper Self Employed capacity?
  • Did the worker use his own equipment, tools and materials or did he only provide his labour? Could the worker send a substitute to do the work?
  • Did the worker have any financial risk? Did he have to correct any mistakes at his own cost?
  • Did the worker have a business bank account? Were regular payments made by the employer into the account, or were payments made only on completion of a particular job or piece of work? Did the worker actually work on a price basis or was it really an hourly rate?
  • Is there evidence of a proper quote for the work performed? Can the employer provide evidence of bids or quotes from different parties before engaging workers?
  • Is there a written contract in existence (or was any other agreement made), and does the actual work done reflect what is written in the contract? Genuine documentary evidence provided by the employer should assist you in determining that work was tendered for or carried out on a self employed basis.
  • How were the terms and conditions agreed and when? Was there an actual agreement or was the worker informed that he was self employed. You are looking to see if the terms were genuine and that the decision on employment status was based on those arrangements.
  • Did the employer seek the advice of HMRC or any other parties in deciding the worker’s status? If the employer can provide evidence, then it shows that care was taken in the decision making process. Typical evidence could be a note of telephone call to HMRC or confirmation of the HMRC guidance followed.

Remember, even though the employer got the worker’s tax status wrong, you are looking for evidence to show that reasonable care was taken in reaching that opinion.

If there is no evidence then it is unlikely a direction would be issued.