ESM0117 | 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.

Where the worker provides their services through an intermediary (see ESM8001), HMRC have taken the decision that they will only use information resulting from changes to Chapter 10 ITEPA 2003 to open a new enquiry into earlier years under Chapter 8 ITEPA 2003 if there is reason to suspect fraud or criminal behaviour. Please see ESM10036 for HMRC’s compliance approach into these cases.

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.