How to engage self-employed people or someone providing a service (the IR35 process)

UK legislation called the Economic Crime and Corporate Transparency Act covers:

• The ‘failure to prevent fraud’ offence
• Scope for attributing criminal activity to an organisation for the actions of its senior managers
• Tough reporting and verification requirements

This links to HMRC’s IR35 rules as it involves assessing contractor status, managing intermediaries, ensuring correct tax treatment and controlling who performs work.  Any weak controls over labour engagement can leave an organisation open to fraud, misrepresentation, reputational damage and/or financial inaccuracy risks.

If you engage someone to provide a service on behalf of the University, then you must follow the University’s engagement processes to make sure you aren't inadvertently failing to comply with UK tax law or international regulatory requirements.

The Engagement Decision Tree has been developed to take account of current HMRC’s rules and UK legislation. It also covers a basic guide for engagement of overseas services. It will guide you to the correct way to engage someone for the services you need.

University Business Rules

Most individuals engaged to conduct work for the University are employed via a contract of employment which is either:

• Permanent (open-ended)
• Fixed term
• Temporary via our Temporary Resourcing Unit

There are occasions when the University may need to engage an individual or company for ‘services’. This could include work done on a very short-term or on a one-off  basis. A contract for services must only be used where no other method of engagement is possible.

The engagement must be funded from within the Faculty/Service budget or other agreed staffing budget.

The engager must follow the outcome provided by the Engagement Decision Tree. This may involve following the IR35 Process and completing forms such as an HMRC Questionnaire, Contract for Services Request form (TR8) or TR2 Request for Temporary Workers form. These forms must be submitted prior to the work commencing.

Codes of Conduct

During every assignment, all workers must comply with the University’s Code of Professional Conduct. This code of conduct relates to anyone employed by the University, working as a temporary worker, and includes individuals working under a contract for services or as self-employed. 
Relations between staff and students | Codes of conduct | University of Exeter.

Conflict of Interest

Current employees cannot undertake additional work for the University on a self-employed basis, even where the services will be paid through a limited company or other business structure. If a potential engagement is considered to have 'exceptional circumstances’, follow the Engagement Decision Tree for details of who can authorise such requests.

Conflict of Interest Policy

University of Exeter Financial Conflict of Interest (FCOI) Policy

Right to Work in the UK

Right to work policy, procedure and guidance

HR Global Employment information

UK Border Agency

UK Govt Immigration Rules

A Personal Service Company (PSC) is usually:

• Limited Company or Partnership
• One majority shareholder (or with spouse, partner or dependant)
• Individual is main beneficiary from services provided
• Likely to be only employee

The key issues to consider when engaging a worker through a PSC are:

• Would the position normally be filled by an employee?
• Can the PSC supply and pay a substitute, and in reality is this practical, based on the nature of the work being carried out?
• Can the University move the “contractor” to a different task or project than they originally agreed to do without issuing a new contract or re-negotiating the current contract?
• Who decides how the work is to be carried out – the University or the “contractor”? (“Control”)  This includes whether the “contractor” is required to follow University’s procedures and receive instruction which apply to employees; who decides the schedule of working hours; where the “contractor” carries out their work.  This less autonomy the “contractor” has, the more likely the relationship is to be akin to employment.
• What does the “contractor” have to provide for the engagement? If the University provides an office, laptop, telephone, email address etc.. then the relationship is more likely to be akin to employment.
• How is the “contractor” paid for the engagement? An hourly, daily or weekly rate is more likely to be akin to employment whereas a fixed price for a specific piece of work, payable on completion will point towards a genuine contract for services.
• If the University is not satisfied with the “contractors’” output, would the “ contractor” have to put it right in their usual working hours at the usual rate of pay (more akin to employment) or in their own time and at their own expense (more akin to contract for services).

University Staff who engage a personal services company to carry out work must assess their employment status using the Engagement Decision Tree above. It is the responsibility of the Faculty or Service engaging an individual to make the initial determination whether the engagement is self-employed (contract for services) or should be paid via our casual payroll so that tax and NI can be deducted. This will then be checked by the IR35 Team. If the result shows they are bound by the IR35 rules, the worker should be engaged through the payroll.  If not, they may be able to be engaged through the Procurement route.

A self-employed individual or business provides the University with their services, but remains independent. The contract between the supplier and the employer is a 'contract for services’. They might also send different people to carry out the work in question. Self-employed workers are not entitled to statutory employment rights.

Individuals engaged on a contract for services:

• bid or provide quotes to secure work and are likely to have other clients in addition to the University.
• maintain control over how, when and by whom the service will be delivered. This means that, generally, there may be an ability to provide an alternative individual (“substitute”) to carry out the service if the individual is not available.
• are paid on receipt of an invoice for work completed.
• will carry the risk for the success or otherwise of their business. This means that if the University is not satisfied with the individual’s work, the University can refuse to pay an invoice or require the individual to put it right in their own time and at their own expenses.
• account for their own tax and National Insurance payments.
• do not receive holiday pay or sick pay or any other employment benefits.
• provide their own equipment/materials to complete a job.
• do not have employment rights, but they are protected for their health and safety on University premises and they are also covered by our equality standards.
• provide their own insurance cover relevant for the work being carried out.

‌You don’t need to use the Engagement Decision Tree for anything in the following list as an IR35 determination is not required.

• Any physical goods, materials, equipment or works
• A licence to use third-party software or online resources without any additional services, such as from a library
• Transferring a grant to a collaborative partner or co-applicant named on the grant application
• Making a donation
• Purchasing or renting space from a space provider, such as an office
• Catering including purchasing of refreshments
• Event tickets such as conference or exhibit/event entrance fees
• Any travel or travel-related costs such as accommodation or air fares

Help and support with obtaining the above

• The Purchasing Section of the PS Connect Portal gives information and guidance on how to use purchase orders, purchasing cards or payment forms for the above items.
• The IT Equipment and Purchasing section of the PS Connect Portal explains how to order standard, specialist or custom IT equipment.
• For Streatham and and St Lukes campuses, contact the Campus Facilities Helpdesk to arrange works such as equipment or premises repairs, fixtures and fittings replacements, cleaning or porterage. Or for Penryn campus, submit a request using FX Plus’s Self-Service Portal.

All colleagues who need to engage a person or organisation to provide any type of service to the University. 

The decision tree aligns with UK legislation and HMRC processes and will confirm the correct way to engage that person or business.  The outcome it gives must be followed prior to work commencing, ideally at least 2 weeks in advance of the engagement starting and before agreeing/issuing any contract or formal agreements with the service provider.

Students should seek support from their supervisor or line manager on how to engage any worker or organisation for services.  This includes but is not exclusive to arranging for proof reading, guest contributors or photographers.

For sport engagements please seek support from aufinance@exeter.ac.uk in the first instance.

Good procurement provides the right outcome, best whole-life cost, legal compliance, reduces risk and introduces innovation.

The University is committed to implementing policies and procedures that support sound procurement practice and that act in a non-discriminative manner when dealing with both existing and potential suppliers. The aim is to promote engagement to encourage best provision and innovation thus improving the University’s reputation and professionalism. Integral to the competitive process is that suppliers should be treated fairly and openly and be given equal opportunity to bid for work if they can meet the needs and requirements of the University.

Colleges and Services should ensure a competitive/tender process takes place when procuring any goods and services clearly stating the relevant and appropriate requirements for those goods and services in terms of best quality and price. Such planning is vital and will enable beneficial and competitive outcomes.

For further information:

• University Procurement Thresholds
• Sustainable and Responsible Procurement

Before any work begins, you should follow the decision tree and action the appropriate outcomes. Ideally, this should be done at least two weeks before the engagement starts and before agreeing or issuing any contract or formal agreement with the service provider.

This is a University policy requirement to ensure compliance with external legislation and regulations, and to enable timely payment once services have been delivered. Two weeks allows enough time for basic compliance checks to be completed.  However, where cases are more complex (for example, where an overseas supplier is involved or where it will be necessary to draft detailed contracts in liaison with Legal Services), two weeks may not be enough to complete all required administration following IR35 approval.

Where work has already been completed, you will still need to follow the decision tree and complete the administration retrospectively. Please be aware that in these circumstances, the compliant outcome may differ from what was originally agreed with the worker or supplier.

Yes, use the Engagement Decision Tree even if this service provider has previously been used by the University.

The tree is designed to work out whether the same approval route and guidance issued for a previous engagement is suitable for this new engagement  or whether a new IR35 assessment is needed.

The factors it considers are :

• Is it the same or a different faculty for the previous engagement
• If the content of this engagement is the same or different to the previous engagement
• If it’s more than 12 months since their previous engagement
• Whether a TR8 approval was issued for their previous engagement or not
•  

If you’re unsure whether the service provider has been used by a different faculty before, ask them to confirm the details and dates of all their previous engagements at the University.

You need to use the Engagement Decision Tree and follow the outcome route it gives even if your service provider is based overseas or is a UK-based service provider but the service itself will be carried out overseas.

This is to ensure the University is compliant with UK and international tax and employment legislation.  The off-payroll rules may differ slightly in other countries but in the first instance the University follows the criteria set by the UK authorities. 

If the decision tree outcome for an overseas worker is to treat as 'employed' or route through the payroll please refer to the Global Employment information pages or  contact the Global Employment Team for advice over what action to take.

Complex cases must be reviewed by the IR35 Team with the Head of Tax  and the Global Employment Team to ensure that the University remains compliant with legislation prior to the commencement of any work.

Very large organisations such as education institutions (i.e. other universities or schools both in the UK and overseas), NHS Trusts, medical practices, councils and PLCs have been exempted by the University Head of Tax from the IR35 process.

If the supplier you wish to use is not one of the above types and you believe it may be exempt, you can search for it using the supplier drop-down list in the ‘Request for contract for services (TR8)’ form in the PS Connect Portal.  The ‘Exempt’ field will be ticked if the supplier has been reviewed and deemed exempt.  Or contact  the Finance Helpdesk with the full name and address of the supplier and the team will check the University's exemptions list.

Once a supplier has been confirmed as exempt, use the reference EXC-PUBLIC (or the specified exemption reference) as follows:

• For a requisition - in the ‘Reference 1’ field in the Settings section
• For a payment request form - in the ‘IR35 Reference Number’ field which pops up when you select ‘Yes’ to the question ‘Does this payment relate to services?’

Firstly review all the answers that you have given in the HMRC questionnaire and make sure that you’ve provided the most accurate answer to the best of your knowledge for each question.

If it’s still undetermined, save the outcome as a pdf and attach to the TR8 and submit to the IR35 Team for review. 

Don’t enter inaccurate answers into the questionnaire because you think this will change the outcome. If you do this, the document may not meet the high standard required for an HMRC audit which could have serious financial and reputational consequences for the University.  

The IR35 Team will review the document together with the engagement details provided on from the Contract for Services request (TR8) form.  The team may alter the HMRC questionnaire on your behalf if they believe a more accurate answer can be included based on the information provided.

Alternatively, the team may be able to approve an ‘undetermined’ outcome using additional criteria. This is at the discretion of the Head of Tax, Head of Pay and Pensions and Assistant Director HR. 

In some cases it may be necessary to advise you to ask the supplier to follow the Temporary Worker process to register and claim for the work on our timesheet system to be paid via payroll.

The IR35 Team will process your Contract for Service Request and advise next actions to take.  Part of this will be for you as the engager to advise the individual how the engagement will be progressed i.e. through the payroll or by invoice.

If the individual worker does not agree with the service determination or employment status determination made by the IR35 team they have the right to appeal the decision:

• Please ask the worker to complete a new HMRC Questionnaire, download and email it to you.
• You should send the new saved outcome to IR35@exeter.ac.uk with clear details of reasons for differing answers, to open a dispute. 
• The dispute will be reviewed by the IR35 Team, the Head of Tax and the Head of Pay and Pensions. This will be within 28 days but in most cases sooner.
• The final say over the determination is the responsibility of the Head of Tax, on behalf of the University.
• The IR35 Team will advise you by email of the outcome of the dispute. You will then be able to advise the individual.

When the final decision has been made over how the worker can be engaged, and this has been communicated to the worker, they have the right to accept the engagement on the basis it has been determined or to reject the offer. If they reject the offer, you should seek an alternative worker.

Where the work has already been completed you will need to follow the decision tree and complete any necessary administration retrospectively. In this instance there is the risk the compliant outcome may differ from what you have agreed with the worker/supplier.

When your request has been reviewed by the appropriate team you will be emailed with the next actions to take.

E-Learning

The University is a member of BUFDG (British Universities Finance Directors Group) which provides free e-learning on several finance-related topics, including tax and IR35.
Visit the BUFDG e-learning website and register for free access to all their courses.

The specific course on HMRC’s IR35 legislation is called  “Extended Workforce: Employment Status and IR35” (course 27).

Teams Workshops and Q&A Sessions

Contact the IR35 team for details of the next workshop or Q&A session.