HMRC reinvents its Employment Status Indicator

HMRC has recently updated its Employment Status Indicator (ESI) in order to promote a more user friendly and reliable system, and address reoccurring customer complaints. The ESI is a tool that allows you to check if an individual, or group of workers, are employed or self-employed for National Insurance Contributions (NIC), tax and VAT purposes. In April 2015, HMRC released its new and improved ESI, which now contains more relevant questions. This new system is easier to use and, so far, seems to be giving the right answers. However, some of the questions are still complicated, which HMRC has acknowledged and is looking to rectify. If you are an employer, the great thing about the new system is that according to HMRC, “you can rely on the ESI result as evidence of a worker’s status for tax/NICS/VAT purposes”. Although, HMRC do state that this only applies if you have answered the questions correctly. It is therefore recommended that you keep pdf copies of your questions and answers should you ever have any queries with HMRC. Furthermore, the new system also allows one-man band companies and partnerships to see if IR35 rules apply to their income. Consequently, if the answer is ‘self-employed’ there is no need to worry about an IR35-related tax enquiry. However, should your result be any different, then we suggest you seek tax advice. If you are not entirely satisfied with the answers you are given by the new system, we advise that you seek confirmation via HMRC directly or an adviser and do not take the answers supplied as fact. To test the ESI indicator for yourself, please click here, or alternatively you can contact Lee Manning at lee.manning@raffingers-stuart.co.uk for more information.