An employee enters into a contract “of” service but a contractor enters into a contract “for” services.
These words can matter. When writing an agreement with a contractor, use the words “for services” in your agreement.
If the person should have been an employee, you should have deducted PAYE from your payments and the employee should not have claimed any expenses. Inland Revenue has listed tests it uses to decide whether PAYE should be deducted. These can be found on its website.
If you have a borderline case, consult us. It’s not safe just to agree that someone working for you does so as a contractor.