How Birketts Can Support Your Business
Businesses are increasingly reliant on contractors, contingent labour and agency workers to fill labour gaps whether sourced directly, through personal service companies (PSCs), agencies or via umbrella companies. However, without due care, these otherwise practical solutions can bring potential tax, financial and reputational risk. In particular businesses need to be aware of and manage their labour supply chain tax risk, including in relation to: IR35 compliance, the off-payroll working rules, the agency rules, the umbrella company rules, and employment status determinations.
HM Revenue & Customs (HMRC) scrutiny in this area has intensified, with some businesses facing unexpected PAYE liabilities and National Insurance liabilities, joint and several liability exposure and complex governance obligations across multiple regimes.
Birketts advises organisations across all sectors on managing labour supply chain risk in a practical, structured and proportionate way.
Our Approach
We advise on labour supply arrangements holistically, rather than looking at the individual tax regimes (as summarised below) in isolation.
Our focus is on how labour is engaged in practice, where tax risk sits within the supply chain, and how that risk can be identified, controlled and managed.
This ensures our advice is relevant to finance directors, general counsel and senior management, as well as HR and procurement teams.
IR35 and Labour Supply Chain Risk Areas We Advise On
IR35 advice (small private sector clients) and Off‑Payroll Working advice (medium/large private sector clients and public sector clients) – both of these regimes apply where services are provided through intermediaries (such as personal service companies) and can shift responsibilities for accounting for income tax and NICs. In particular, we can assist with:
- worker employment status assessments;
- determining PAYE/NIC responsibility in labour supply arrangements; and
- reviewing internal governance, documentation and processes.
From the 2026–27 tax year, the company-size thresholds for IR35 increased, with this change following a previous increase to the turnover and balance thresholds in April 2025, although the impact of this change only impacts businesses for tax years beginning from April 2027.
Agency Rules – under these rules the agency is responsible for accounting for PAYE and NICS. However, these rules only apply where a supply chain involves payments to a “true agency”. We can assist with:
- determining whether your current structures align with the agency statutory requirements;
- identifying which party in the labour supply chain is responsible for operating PAYE and NICs, and
- reviewing supply arrangements, contractual protections, internal governance and processes.
Umbrella Company Rules – broadly, these rules apply where a business supplies workers under contract and either the workers are employed by that business or the business appears to be their employer (but does not actually deduct PAYE and NICs). We can assist with:
- determining whether the Umbrella Company rules apply;
- reviewing contractual protections; and
- managing the joint and several liability risk within complex supply chains.
From 6 April 2026, new rules imposed joint and several liability for unpaid PAYE income tax and NICs on parties higher up the labour supply chain, including recruitment agencies and, in some cases, end-user clients. For more information see: Umbrella companies – what businesses need to know from April 2026.
Governance and Process Failures – inconsistencies between contracts, working practices and internal policies can lead to unexpected tax liabilities and reputational damage. We can:
- review internal governance, documentation and processes, identify and suggest amendments and resolve any issues; and
- review employment status determination processes and worker status governance frameworks.
Our Core IR35 and Labour Supply Services
Labour Supply Chain Red Flag Review
A high-level review of how labour is engaged across your organisation, mapping tax risk across IR35, off‑payroll working, agency and umbrella arrangements. Clients receive a clear summary identifying areas of concern, practical feedback and prioritised actions.
Labour Supply Contractual Review and Remediation:
- High Level Review – a high-level review of your labour supply chain contracts outlining the key risk areas and contractual concerns.
- Contract Remediation – we can also implement recommended contractual changes, providing clear explanations of the risks they address, and insert contractual protections.
Workers’ Employment Status Review and Remediation
Review of workers’ employment status for Tax purposes. We can assist with determining employment status, reviewing CEST determinations and suggesting contractual and labour policy amendments to help reduce tax risks.
While HMRC’s CEST tool is useful, it is only as good as the information put into it, and in some cases, even if the result points to employment, sensible changes can be implemented to shift the arrangement more clearly away from employment.
Employment Status Determination Process and Governance Review
We can also review your organisation’s employment status determination processes, contractual documentation and working practices, identifying gaps in governance and areas of potential PAYE and NIC exposure and suggesting remediating actions.
Ongoing Advisory Support
Continuing advice on new engagement models, worker employment status assessments, contract reviews and evolving HMRC guidance, with access to specialist Corporate Tax input as issues arise.
Who We Work With
We regularly advise organisations that:
- engage contractors, consultants or agency‑supplied labour
- operate in construction, infrastructure, healthcare, logistics, technology or professional services
- are scaling rapidly, changing workforce models or integrating new businesses following mergers or acquisitions
We also work closely with accountants, payroll advisers and employment agencies, providing specialist support while preserving trusted adviser relationships.
Why Birketts
- Joined‑up advice across Corporate Tax, Employment and Commercial teams
- Practical, risk‑focused guidance rather than technical theory
- Clear identification of exposure and proportionate solutions
- Deep expertise in IR35 compliance, off-payroll working rules, employment status, and labour supply chain governance.
- We have deep sector expertise spanning over 15 markets.
If you would like to discuss your IR35 compliance obligations, off-payroll working arrangements, employment status assessments, the application of the umbrella company rules, your broader labour supply chain tax risk or explore how Birketts can support your organisation, please contact a member of the Birketts Corporate Tax team.
Key Contacts
