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Engaging contractors through Non-Employment Status Assessment (NESA)

How to carry out an assessment of employment status prior to engaging an individual / contractor for contract work in line with the HMRC IR35 regulations.

What is NESA

NESA is a Non-Employment Status Assessment. In April 2017 Her Majesty's Revenue & Customs (HMRC) introduced significant changes relating to regulations around IR35 which applies to payments made to intermediaries. For individuals and companies who are engaged to provide services, an employment assessment is required to determine how they can be engaged (i.e self employed contractor or worker) and if the University is required to deduct Tax and National Insurance (NI) contributions from payments made to them.

Our process

You may be able to engage an individual as a contractor – subject to the status of the engagement under HMRC rules. This is actioned through a 'Contract for Services', which is managed through Procurement (Purchasing Services).

The University is required to ‘test’ the employment status of the engagement by applying a number of set questions to the circumstances of the engagement. To do this please follow steps 1 - 5 outlined below (these steps are summarised on the NESA process map that can be found here.

Please note

It is essential that this assessment is carried out before the work starts. If the assessment is not carried out prior to work starting payments will be delayed to the engagee/worker and the department will be liable to pay for any Tax and NI that may apply to the engagement.

Situations which do not require Employment Status assessment

  • If you are purchasing goods (and not services) follow the standard Procurement process and raise your purchase order.
  • If you are engaging an individual from a Ltd Company that has more than 5 staff follow the standard Procurement process and raise your purchase order .
  • If the engagement is for an hourly paid worker follow the Hourly Paid Workers process.
  • If an External Examiner (EE) – please follow existing process for UG and PG EEs – an assessment has been made for PG External Examiners.

Terminology

  • engagee/worker - the individual who will be undertaking the work
  • engager - the person at University of Bath who is responsible for the engagee
  • engagement - the work that they will be doing at the University of Bath

Training

In order to process a NESA and get access to the internal NESA WebApp you must have completed the NESA Training. You can book a training session through Employee Self Service - and there is guidance on how to book or cancel a place on a course.

NESA WebApp Users

To check who in your department has access to the NESA WebApp click on relevant link below:-

Length of an employment assessment

HMRC require the tax treatment of engagements to be revised at least every 12 months as the engagee may change the way they operate during this time (i.e move from sole trader to limited company). Therefore the maximum length of an employment assessment should be 12 months. If the engagement is longer than 12 months, a new assessment will need to be completed for the remaining terms or next 12 months whichever is shorter.

Step 1: Check if you need an Employment Status assessment

Before you start the process you should check if an Employment Assessment is required for the engagement. You can do this by running a Supplier Check on Agresso.

  • Log onto Agresso and run the Supplier Type and PO Method Report for the engagee.
  • It will tell you if they are an existing supplier and if a Employment Status assessment is required.
  • New suppliers - if no supplier details are returned, the supplier has not been registered on Agresso. Please follow the Procurement New Supplier process to register the supplier. When sending the New Supplier form to the individual, also attach a Pre-NESA Questionnaire (with sections 1 and 4 pre-filled) and ask the individual to complete sections 2 and 3 of the PNQ if they will be providing the services themselves as a sole trader/individual or through a company or partnership with 5 or less employees. See suggested wording for your email in Step 2.

Step 2: Pre-NESA Questionnaire (PNQ)

  • If an assessment is required, or this is a new supplier to the University, you need to send the engagee/worker a Pre-NESA Questionnaire (PNQ) electronically so that you can start the engagement process. You, as the engager will need to complete Sections 1 and 4 first and then email the form to the engagee/worker. Please see template email for this here.
  • The engagement value on the PNQ must include the estimated value of expenses (where appropriate to the engagement).
  • The engagee/worker must return the PNQ before commencing work. If the PNQ is not received before they are due to start the work, the start date of the work must be postponed until this has been returned and an assessment carried out. Failure to do the assessment prior to the work starting will delay any payments due to the engagee/worker and the department will be liable for any tax or NI that may be applicable to the engagement.

Overseas Engagements

An employment assessment will not be required if the engagee (worker) has indicated on the PNQ that they will be providing services outside of the UK and they are registered outside of the UK for tax purposes. Please email the PNQ and any queries on overseas engagements to consultancy@bath.ac.uk.

Team Working

If the engagee/worker has ticked yes to "using a team of people" for this engagement please forward the PNQ to procurement at consultancy@bath.ac.uk to confirm the action required.

Step 3a: Check to see if the engagement is a common role

Using the completed PNQ from the engagee/worker, you should check to see if one of our common role assessments fit the engagement.

The table below lists the common roles that the University of Bath uses on a regular basis. Each common role has a list of essential criteria that an engagement must meet for that common role assessment to be used.

Before selecting a common role assessment you must check the essential criteria against the answers supplied on the PNQ by the engagee/worker and Sections 1 and 4 which have been completed by you/the engager to ensure that the common role is appropriate for the engagement.

Common Roles

Engagement Title Essential Criteria
Coaching/Mentoring Essential Criteria
Digital Graphic Designer Essential Criteria
Distance Learning Mentor Essential Criteria
Expert Patient/Performance Actors Essential Criteria
Occasional Guest Lecturer Essential Criteria
Photographer/Video Filming Essential Criteria
Practice Based Supervisor Essential Criteria
Specialist Consultant Essential Criteria
Specialist Sports Coach Essential Criteria
Sports Assessor/Trainer Essential Criteria
Transcriber Essential Criteria
Window Cleaner Essential Criteria
Workshop/Event Speaker Essential Criteria

Step 3b: Use the HMRC CEST Tool (if no common role)

If you are unable to find an appropriate Common Role Assessment you will need to complete an assessment using the HMRC Check Employment Status for Tax (CEST) tool.

Please refer to the detailed guidance on using the HMRC CEST tool.

Step 4: Use NESA WebApp to complete assessment

Please note in order to gain access to the NESA WebApp you must complete the NESA Training. You can book a training session through Employee Self Service.

  • Log into the NESA Web App using your University of Bath username and password.
  • Fill in the details about the engagement and the engagee/worker using the information provided on the PNQ.
  • If you have been able to select an appropriate Common Role Assessment, you will need to select the relevant Assessment using Side A on the Assessment Details section.
  • If you have used the HMRC CEST tool to get the Employment Status Determination, you will need to load the HMRC pdf Assessment to the WebApp using Side B on the Assessment Details Section.
  • Once you have entered all the information and pressed submit the WebApp will confirm the determination in terms of employment and tax status and workflow you into either the Procurement or HR process to set up and action the engagement.

Status Determination Statement

  • The university is required to email a status determination statement to the engagee/worker before they commence the engagement.
  • A status determination statement provides the engagee/worker with the outcome of the assessment and sets out how their engagement will be treated by the University i.e self employed for tax purposes or employed for tax purposes.
  • The engagee/worker has the right to raise a disagreement against the status determination statement and they can do this by following our Status Disagreement Process.
  • The WebApp will automatically send a status determination statement to the engagee email address that was provided on the PNQ and entered into the NESA WebApp. The status determination statement will also include the completed PNQ and the detailed assessment that has been uploaded to the WebApp.

Step 5: Follow the prompts to engage the contractor

When you have completed the assessment on the WebApp, you will receive an email confirming what you need to do next to progress the contract. Please follow the instructions in the email to set up a contract.

  • If the determination is 'Self Employed for tax purposes for this work' or 'Off Payroll Working Rules (IR35) do not apply', you will need to raise a Purchase Order in line with the Procurement processes so that when the work is completed, it can be paid through an invoice.
  • If the engagee is an individual or sole trader and has indicated on the PNQ they cannot provide an invoice and the contract value is below £750 a NESEC (a Non-employment Short-term Engagement Contract) may be used. If a NESEC is used, a Purchase Order must be raised in line with Procurement processes so that when the work is completed, it can be paid through the NESEC.
  • If the determination is "Off-payroll working rules (IR35) apply" you will need to email nesa@bath.ac.uk and you will be provided with further guidance on how to proceed.
  • If the determination is "Employed for tax purposes for this work" you will need to follow the hourly paid worker process.

Status Determination Statement (SDS) Disagreement Process

An engagee/worker has the right to raise a disagreement if they do not feel the Status Determination Statement is correct.

  • If an engagee wishes to raise a disagreement they should email nesa@bath.ac.uk stating the reasons why they disagree with the status determination statement.
  • The University has 45 calendar days in which to respond to the disagreement from the date that this is received from the engagee/worker.
  • The HR Operations Manager will consider the reasons for the disagreement provided by the engagee/worker and will review the PNQ that was completed by both the engagee/worker and the engager and the assessment documentation i.e the common role assessment that was used or the CEST tool assessment that was uploaded to the WebApp.
  • The HR Operations Manager will respond to the engagee/worker to inform them of the decision and the reason for the decision.
  • If the outcome of the disagreement process is that the University will stand by the original decision then the response will explain the reasons for this decision.
  • If the outcome of the disagreement process is that the University agree that the original decision is incorrect, the reasons for this will be explained in the response and a new assessment will be undertaken and a new status determination statement will be issued to the engagee.

The NESA web app

Log into the NESA web app

Enquiries

Please refer to below contacts section with regards to who to contact for enquiries