IR35 and interim contractors:a buyer’s guide.

Public sector organisations engaging contractors through intermediaries carry a responsibility that private sector clients acquired later and smaller organisations still do not have: the obligation to determine the contractor's employment status for tax purposes, and to communicate that determination.

In practice this is frequently handled by treating the supplying agency as though it owns the question. It does not. Understanding where the responsibility actually sits — and what a good supplier should be doing to support you with it — avoids an unpleasant surprise later.

What the client is responsible for

Broadly, where a public authority engages a worker who provides services through an intermediary such as a personal service company, the authority is responsible for assessing whether the engagement would be one of employment if the intermediary were not there. That assessment must be documented, communicated to the worker and to the party the authority contracts with, and supported by reasons.

The authority must also have a route by which the worker can challenge the determination, and must respond to challenges within a defined period. Getting the determination wrong, or failing to take reasonable care in making it, can result in the tax liability landing with the authority rather than elsewhere in the chain.

That is the shape of it. The specific rules, thresholds and timeframes have been amended more than once and continue to attract attention, so verify the current position with your finance team or tax advisers rather than relying on a summary — including this one.

What a supplier should do for you

A supplier cannot take the determination off your hands, and you should be wary of any who implies otherwise. What a good supplier can and should do is make your job straightforward:

• Carry out a status assessment for each engagement and provide it to you with the reasoning set out, so you are reviewing and adopting an analysis rather than starting from scratch
• Provide contractual documentation that is consistent with the determination — a contract describing substitution rights and freedom from control does not sit well alongside an inside-scope determination, and inconsistency is what attracts attention
• Flag where the working practices you describe are likely to point to a different conclusion than the contract does, because in a dispute the working practices tend to matter more
• Maintain records for the required retention period and give you copies
• Accept your determination where it differs from their assessment, and adjust the engagement structure and rate accordingly rather than arguing

The factors that actually matter

Status assessment is fact-specific and no single factor is decisive, but in HR interim engagements a few come up repeatedly:

Control. Is the contractor told what to do, how to do it, when and where? An interim HR business partner embedded in a directorate, attending team meetings, line-managed by your head of HR and working your hours looks quite different from a consultant delivering a defined project to their own method.

Substitution. Could the contractor genuinely send someone else? In HR casework the answer is often no in practice, even where the contract says yes — the client selected that individual for their experience and would not accept a substitute. A substitution clause that everybody knows would never be exercised carries little weight.

Mutuality of obligation. Is there an expectation of ongoing work being offered and accepted? An interim covering a vacancy for nine months, doing whatever the role requires as it arises, looks different from someone engaged for a specific deliverable.

Integration. Does the contractor appear to the outside world as part of your organisation — your email address, your business cards, your management structure, your appraisal process? Integration tends to point towards employment.

None of this means an embedded interim is automatically inside scope. It means the determination has to be made honestly on the actual facts, and that the facts of a covering interim engagement frequently differ from those of a project consultancy engagement, even where the person is the same.

Practical questions to ask a supplier

• Will you provide a documented status assessment and reasoning for each placement?
• What happens if our determination differs from your assessment?
• Is the day rate quoted inside-scope or outside-scope, and what changes if the determination changes?
• Who employs or engages the contractor, and what is the full contractual chain?
• What records will you keep, for how long, and will we get copies?
• How will you handle a status determination challenge from the worker?

A supplier who answers these clearly is one you can work with. A supplier who is vague about the contractual chain, or who suggests the whole question is handled at their end, is one to press harder.

Why we handle it the way we do

On our own placements we carry out the assessment, provide you with the determination and reasoning to review and adopt, and maintain the records. Where your determination differs from ours, yours governs — you carry the responsibility, so you should carry the decision. We will restructure the engagement or adjust the rate accordingly and tell you plainly if that changes what is achievable.

More on how the supply arm works, including vetting and replacement terms, on the interim HR contractors page.

Note. This article is general guidance, not legal advice, and it does not create a client relationship. Employment law and statutory thresholds change; verify the current position before relying on anything here. For advice on your specific situation, get in touch.