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HMRC internal manual

Employment Status Manual

Introduction: relevance of an “office or employment” for tax and NIC purposes

Section 19(1)1 ICTA 1988/Part 2 ITEPA 2003

SS Contributions and Benefits Act 1992 and the SS (Categorisation of Earners) Regulations (SI 1978 No. 1689)The income of an individual who receives payments for services will normally be chargeable to Income Tax as trading income or as employment income. Where the income comes from an office or employment it is chargeable as employment income. The income of an individual who is not an employee or office holder but a self- employed person (see BIM14000 onwards) is likely to be chargeable as trading income. There is an exception in the case of certain agency workers (see


The individual’s employment status will also determine liability to pay National Insurance contributions (NICs). The general rule is that a person engaged as an employee or office holder will be liable for Class 1 NICs. A person engaged on aself-employed basis will be liable for Class 2 and, normally, Class 4 NICs.

In the majority of cases status is decided on the same basis for both NICs and tax. There are some exceptions though, which are covered at ESM4000onwards.