IR35 Legislation & Employment Status Checks
IR35 is the industry name for a specific part of the Finance Act 2000. It aims to prevent people avoiding tax by working as self-employed contractors through an intermediary limited company (known as a Personal Service Company), while performing the same function as regular employees.
The legislation says that these kinds of contractors should be subject to the same Income Tax and National Insurance Contributions (NICs) as regular employees. In other words, the legislation ensures that, if the relationship between the worker and the client would have been one of employment if it wasn’t for the intermediary company, the worker pays tax and NICs roughly equivalent to an employee.
The IR35 legislation requires the University to determine whether or not that contractor would be subject to employment tax if they had performed those services directly for the University rather than via a Personal Service Company. This is ‘facts and circumstance’ assessment that looks at the relationship between the parties and determines whether the way in which those services are delivered is indicative of genuine self-employment. If the assessment has not been completed and it transpires that the contractor should have been classed as an employee, the University can be fined by HMRC and is also liable for any tax and NICs that the contractor should have paid.
To ensure compliance with the legislationthe University asks all potential suppliers of services to complete the HMRC Employment Status (ES) check. The results of this survey indicate whether a contractor can be set up as a supplier to the University or whether they should be classed as a University employee.
The Employment Status Check only takes a few minutes to complete but uses specific terms to describe the working relationship that may not be familiar to you. If this is the case you can contact the University’s Accounts Payable Team on 01227 922296 who may be able to explain the terms used. Potential suppliers should note that the University can only help define the working relationship based on the terms of engagement and information provided by the supplier. HMRC require that all information provided during the completion of the ES check must be accurate. If HMRC find evidence of a contrived arrangement to manipulate the results of the survey they will impose higher levels of penalties on both the University and the supplier.
Whether or not a potential supplier has to complete an Employment Status Check depends on two different factors – the status of the company (e.g. registered company, partnership, sole trader etc.) and what the company will be supplying the University (goods or services). The table below allows suppliers to determine whether the checks are required.
Company Status / Goods / ServicesRegistered/Limited Company / /
Limited Liability Partnership / /
Charity / /
Self Employed/Sole Trader / /
School or University / /
Other / Contact the University for Guidance / Contact the University for Guidance
/ Employment Status Check Required
/ Employment Status Check Not Required
Please note, the table above is for guidance only. Potential suppliers should follow the instructions provided on the Supplier Request form as to whether an Employment Status check is required.