How do I respond to an HMRC off-payroll working letter?

Off-payroll working letters vary widely in scope. Some ask about a single contractor's status, others review the client's whole status determination process across its contractor population, and some are prompted by a specific complaint or disagreement raised by a worker.

Identify exactly which engagements or time periods HMRC is asking about, and whether the query relates to how a determination was reached, or to whether PAYE was correctly operated once a determination was made.

Note the deadline for response and check whether HMRC has issued a formal Schedule 36 Finance Act 2008 information notice or is simply asking informal questions ahead of deciding whether to open a fuller check.

Under Chapter 10 Part 2 Income Tax (Earnings and Pensions) Act 2003 (opens in a new tab), a medium or large client (or public sector body) engaging a worker through a personal service company must take reasonable care in reaching a status determination and provide it to the worker and, where relevant, the fee-payer.

HMRC's questions typically probe whether reasonable care was genuinely taken — for example, whether the determination considered the actual facts of the engagement or relied on a generic template — and whether the determination matches how the work is really carried out.

Where a worker has used the client-led status disagreement process to challenge a determination, HMRC may be following up on how that disagreement was resolved and whether the client responded within the required period.

Pull together the status determination statement for each engagement in question, along with the reasoning recorded at the time, not a reconstruction produced after the letter arrived.

Gather evidence of how the engagement actually operates day to day — who directs the work, whether the contractor can send a substitute, how invoicing and payment work — since this is what determines the correct answer, whatever the contract says.

Where multiple engagements are in scope, prioritise reviewing the highest-value or longest-running ones first, since these carry the greatest financial exposure if HMRC disagrees with the determination.

If you are the end client, make sure the person compiling the response understands both the contractual and practical reality of each engagement, not just HR or payroll records.

If you operate as a contractor through a personal service company, cooperate with any request from your end client for information about how you actually work, since an incomplete or inconsistent account can weaken the determination.

Keep the response consistent across every engagement reviewed; contradictory answers between similar contractors are a red flag for HMRC.

If HMRC ultimately disagrees with a status determination, the client or fee-payer can face PAYE and National Insurance liabilities for the period concerned, plus interest and possibly penalties.

Reviewing a portfolio of contractor engagements properly, with supporting evidence for each, takes considerable time and specialist status expertise. Growth plan clients have free tax investigation insurance included, covering our fees for responding to an off-payroll working letter — see /fees.

Addressing weaknesses in the determination process going forward reduces the risk and cost of future checks.

Do not respond using a blanket status conclusion applied to all contractors without engagement-specific reasoning.

Do not ignore a worker's status disagreement notice; the client-led process has statutory time limits for a response.

Do not treat the Check Employment Status for Tax tool result as sufficient evidence on its own without recording the underlying facts considered.