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HMRC internal manual

Employment Status Manual

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HM Revenue & Customs
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Guide to determining status: contracts - are the terms genuine?

Where there is doubt about the bona fides or comprehensiveness of a written contract then you need challenge its terms.

It is important to recognise that demonstrating a contract is a sham can be extremely difficult. In such cases the onus is on you to prove sham. Where there is no reason to doubt the terms of a signed contract, you should decide status in the normal way (for draft or hypothetical contracts see ESM0127). However, where there is doubt about whether the written contractual terms are genuine then

  • If the matter has arisen during an employer compliance review the full facts should be established to arrive at the correct status.
  • If you are asked by the engager or worker for advice on status and

    • you have serious doubts about the bona fides or comprehensiveness of a written contract, the full facts should be established to arrive at the correct status
    • you have doubts but they are not major and, taken at face value, the written terms suggest the contract is a contract for services (self-employment), you may say so but should add the following sentence to your letter when giving advice

‘My view assumes the written terms reflect the true arrangements and, as part of its normal compliance activities, the Revenue reserves the right to check that the working arrangements are as set out in the contract.’

ESM0510 onwards gives guidance on what to look for when considering whether the terms of a contract are genuine.