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Are you employing someone illegally? Use the HMRC Employment Status Tool to make sure you are compliant

2 August 2014 by Crystal HR & Payroll Ltd

Employment Status Indicator

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.

Who can use the tool

The ESI tool is helpful 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 employment status.

Tougher penalties to combat illegal working

Tougher penalties to combat illegal working

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

  • company directors and other individuals who hold office
  • agency workers
  • anyone providing services through an intermediary (sometimes referred to as IR35 arrangements)

How the tool works

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

The tool will ask you a series of questions about the working relationship between worker and engager. If you have a contract setting out the terms of the relationship, it will be useful to have it to hand.

When you start using the tool, your enquiry will be assigned a ten digit ESI reference number (look for it in the top left of the screen). Write this down because you can use it to resume your session later if you don’t complete all the questions in one go. The tool automatically saves your progress when you close it, and you have seven days to continue from where you left off.

The ESI result

When you’ve answered all the questions, the ESI tool will provide an indication of the worker’s employment status. You can rely on the ESI outcome as evidence of a worker’s status for tax/NICs/VAT purposes if both of the following apply:

  • your answers to the ESI questions accurately reflect the terms and conditions under which the worker provides their services
  • the ESI has been completed by an engager or their authorised representative (if a worker completes the ESI tool the result is only indicative)

However, you should print or save copies of the ‘Enquiry Details’ screen and the ‘ESI Result screen’, bearing the ESI reference mentioned above. If the worker’s employment status is questioned in the future, HM Revenue & Customs will only be bound by the ESI outcome if these copies can be produced.

Conditions of use

Employment status is determined by the contractual terms of an engagement. Normally, this will be the written agreement between the parties. However, where the written document does not represent the whole bargain, or where the terms have been varied either by express agreement or by practice, or where there is no written agreement, then the information entered into the ESI tool may reflect the terms of the contract, what the parties carry out in practice, or a combination of both.

The information you provide should, to the best of your knowledge, accurately reflect your working arrangements. HMRC routinely carries out compliance activities. In the course of these activities, they will check that the working arrangements reflect the information provided.

If you wish to use the ESI tool for a group of workers then they must all have the same material terms of engagement. Otherwise you must submit a separate ESI enquiry for each individual worker.

I accept the conditions of use – go to the ESI tool

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