The email arrives. HMRC wants to discuss your tax affairs and they’re offering a telephone call to “clear up a few questions.” It sounds innocent enough: just a quick conversation to sort things out. But should you accept?
The short answer: politely decline. Request that all correspondence be submitted in writing. Here’s why that seemingly simple decision could be the difference between shutting down an enquiry early and inadvertently handing HMRC the ammunition they need.
Why HMRC Telephone Calls Are a Trap
HMRC carries out approximately 30,000 employer compliance reviews every year, with employers facing an average bill of £10,000. When HMRC calls, they’re gathering evidence and telephone conversations give them significant advantages [HMRC’s criminal investigation powers and safeguards – GOV.UK].
During a call, HMRC can slip in curveballs designed to catch you off guard. “How do you pay your subbies? Is it by the hour?” “Do your subcontractors use your company vehicles?” These questions sound straightforward, but your spontaneous answers can be twisted and used against you in future proceedings.
Written correspondence forces both parties to be precise. You have time to consider responses, ensure accuracy and provide proper context. You can reference specific contractual terms and documented procedures. There’s no risk of misspeaking or being led down an unintended path.
How Employment Status Investigations Actually Begin
An HMRC enquiry rarely starts as an investigation into employment status. It’s far more likely to begin as a general tax enquiry into your VAT return, a CIS payment or a corporation tax deduction.
We’ve seen HMRC question a VAT refund request, then ask for copies of contracts between the business and client. Or clients facing questions about why subcontractors were using company fuel cards. These seemingly minor details become the thread HMRC pulls to unravel entire working arrangements.
They spot small inconsistencies whilst reviewing accounts… then they pounce. If anything suggests your subbies might not actually be genuinely self-employed, they’ll pursue it relentlessly.
The Investigation Process: What to Expect
The Initial Letter: The first contact usually arrives by post requesting information about your working arrangements with subcontractors. HMRC will ask you to explain why you’ve classified workers as self-employed and request copies of contracts, payment records and policies.
This isn’t yet an official investigation. It’s a simple fishing expedition. Your response at this stage is critical. Provide clear, documented evidence of genuine self-employment and you may shut things down before they escalate.
Detailed Questioning: If HMRC believes there’s a case, expect increasingly detailed questions focusing on control, mutuality of obligation [https://hardhats.co.uk/mutuality-of-obligation-moo-a-quick-guide-for-construction-firms], substitution rights, financial risk and whether workers are in business on their own account.
HMRC will not take your contracts at face value. They’ll check that what’s written matches actual working practices. They’ll request site attendance records, timesheets, correspondence, health and safety documentation, vehicle policies and handbooks. Every document gets scrutinised for contradictions.
Worker Interviews: HMRC may interview workers directly, asking about daily operations, who gives instructions or how work is allocated. These interviews can be particularly damaging if workers describe employment-like arrangements that contradict your documentation.
Tribunal: If HMRC concludes that employment status applies and you disagree, the matter may proceed to a tax tribunal where you’ll need to present a robust legal defence.
The Real Costs of Reclassification
If HMRC successfully reclassifies your subcontractors as employees, you’ll be liable for unpaid income tax and National Insurance contributions — both employer and employee portions — potentially covering several years. Add interest charges and penalties to these if HMRC determines you failed to exercise reasonable care.
For construction businesses with significant subcontractor workforces, this can easily run into hundreds of thousands or even millions of pounds. Beyond the financial hit, there’s months or years spent responding to enquiries and defending your position.
Why Documentation Is Everything
The most effective defence is having watertight documentation that accurately reflects how you actually work with subcontractors. Your contracts must mirror operational reality, not aspirational descriptions.
When HMRC asks whether subbies drive your vans, you need specific contractual clauses explaining why and how this works within a genuinely self-employed relationship. When they question uniform requirements, your contracts should detail the health, safety, and security rationale.
Off-the-shelf contracts are dangerous because they don’t reflect your specific operations. They create the documentation-reality gap that HMRC exploits. Bespoke contracts built around your actual working practices eliminate this vulnerability.
Preparation Beats Panic
If HMRC offers a telephone call, politely decline and request written correspondence. If they’ve sent an initial letter, don’t panic. But don’t ignore it either.
Businesses that successfully defend employment status investigations prepared before HMRC arrived. Their contracts accurately document genuine self-employment relationships. Their operational practices align with contractual terms. Their evidence is comprehensive and consistent.
At HardHats, we create bespoke contracts documenting exactly how you work with subcontractors. We handle any enquiries on your behalf, drawing on extensive experience defending employment status challenges. Our contracts are insurance-backed: if reclassification occurs despite our representation, we cover the costs.
Don’t wait for HMRC’s to come calling and then discover your documentation won’t withstand scrutiny. Get in touch with us to build your defensive wall before HMRC tries lobbing penalties in your direction.