What does having a UTR actually mean?

Recently we have heard of some concerning hiring practices. This includes people being classed as self-employed on the basis of having a UTR alone. We have written this short summary of the significance (or not) of the UTR from an engager’s perspective:

• A Unique Taxpayer Reference (UTR) is simply a 10-digit number, for example 12345 67890, provided by HMRC when someone registers for self assessment for the first time. It might just be called a ‘tax reference’.
• Self-employed individuals pay their tax and National Insurance contributions through the self assessment system so should have a UTR. However, so do many other individuals, who are not self-employed. For example, those with rental properties, investments or foreign pensions may pay tax through the self assessment system and also have a UTR.
• It is possible to get a UTR even if you don’t really have a reason to be in the self assessment system!
• You apply for a UTR by filling in a short form online. Which form you complete, depends on the reason you are applying – for self-employment, or another reason. Getting a UTR as a self-employed person does not mean HMRC have checked the person meets the self-employment criteria. It is therefore not a confirmation that someone is genuinely self-employed.
• It is also important to understand that just because someone has a UTR because they are self-employed in one job doesn't necessarily mean they will be self-employed in another job. The same goes if they have a UTR because they have been self-employed in a previous job – it doesn’t mean they will be self-employed now.
• Having a UTR does not mean that someone is actually compliant with their tax obligations and has filed their tax returns (accurately and/or on time) or paid their taxes. We know that some engagers might require proof of compliance and taxes paid in certain sectors or for positions of responsibility, trust and credibility. Having a UTR does not provide this proof.

In summary, it is easy to get a UTR and having one does not ‘confirm’ that someone is self-employed. It simply means that the person has registered for self-assessment with HMRC. To work out if the person you are hiring is genuinely self-employed, you instead need to consider a variety of factors, as set out in our guidance for engagers. There can be severe consequences for getting someone’s ‘employment status’ wrong, so don’t oversimply things by relying on the presence of a UTR to make important hiring decisions!