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HMRC internal manual

Employment Status Manual

Procedural aspects of status cases: where there is agreement

Where it is agreed that a worker who has previously been regarded as self-employed should now be treated as employed, then you will need to consider whether to pursue the employer for NICs and tax for back years. The law and practice relating to NICs and tax is different, so you will need to consider each separately.

For NICs, you should seek all arrears but, if you have to take enforcement action on arrears from the employer, you should limit this to the previous six years. You should only consider non-enforcement of the debt as a very last option after all other avenues have been explored and discounted. You should also ensure that the individual’s contributions record is amended accordingly. Remember that it may be possible to set Class 2 and 4 NICs paid against primary Class 1 liability.

For tax, consider recovery for previous years in accordance with existing instructions in the Compliance Operational Guidance (COG) manual.

When settling cases for both NICs and tax it is important you liaise with your tax/NICs colleagues.