I have a contractor that is a borderline case employee/contractor when assessed using HMRC's Employment Status Manual (http://www.hmrc.gov.uk/manuals/esmmanual/index.htm).
The contract is directly with this individual (no intermediary). The current treatment is one of self-employment, hence as the employer we do not may any PAYE deductions or pay any employer's national insurance contributions.
I would like to understand the consequences of a reclassification. For example, if we were audited by HMRC and it was decided that we had incorrectly classified the contractor and should have been treating him as an employee.
- Would HMRC come after us for employer's NI contributions that should have been paid?
- Would there be any fines?
- Are there any other consequences?
In regards to the above, are there any good sources to refer to?
Also, is there a proactive way to address borderline cases with HMRC?