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Do you use the Employment Status Tool?

Determining whether a worker is Employed or Self Employed isn’t always easy.

HMRC updated and improved their tool in April 2015.

The Employment Status Indicator (ESI) tool enables you to check the employment status of an individual or group of workers – that is whether they are employed or self-employed for tax, National Insurance contributions (NICs) or VAT purposes.

The ESI tool is essential for anyone who takes on workers, such as employers and contractors. (The tool refers to anyone in this position as an engager.) Individual workers can also use the tool to check their own employment status.

The tool cannot, however, be used to check the employment status of certain workers:

  1. company directors or other individuals who hold office
  2. agency workers
  3. anyone providing services through an intermediary (sometimes referred to as IR35 arrangements)

The ESI tool is completely anonymous, so no personal details about the worker or engager are requested.

Click here to use the HMRC Tool

What is your status – Self Employed or Employed?


A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee

If a worker should be an employee HMRC will seek to recover the employment taxes from the employer not the worker, so there are considerable risks for the employer if the status of its workers is wrongly assessed.

Some employers might decide to insist that sub-contractors must be limited companies, as companies can’t not be reclassified as employees.

The sub-contractor would then need to assess whether IR35 applies to their contract. If IR35 does apply then please read this blog on Deemed Payments

Are you ready for an HMRC Employer Compliance Check?

Stress business woman

HMRC check 30,000 UK businesses each year for Employer Compliance Checks, will it be your turn next.  HMRC usually find something wrong, lets face it with the best will in the world mistakes happen – HMRC have collected £20.7bn overall in record compliance as shown in this infographic.

9198338833_8edc83a0dd HMRC



Why not ask a CIMA Accountant to check on Status/Employer Compliance matters we can:

  • Discuss areas of concern with you
  • Prepare new procedures
  • Apply for Dispensations
  • Help you disclose errors and reduce penalties
  • Carry out a Full Risk Assessment & provide Recommendations

You never know you we might even find errors in your favour and be able to get a refund.

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