Right to work checks reach the contractor's substitution clause from 1 October

From 1 October the illegal working regime stops at nothing short of the whole labour supply chain. Section 48 of the Border Security, Asylum and Immigration Act 2025 comes into force on that date and extends the duty to check a worker's right to work beyond conventional employment to worker contracts, individual sub-contractors and the online platforms that match people to jobs. For the first time, the limited company contractor's right of substitution has a Home Office dimension.

The change, explained this week by Parasol's group sales director Ashley Olliver in a guide for the contractor press, redraws who is liable. Under the current regime an employer must check that an employee is entitled to work in the United Kingdom, and gains a statutory excuse against a civil penalty if the check was done properly. The new section 15A extends that liability to anyone who contracts to supply work onwards: end clients that pass work down a chain, managed service providers, recruitment process outsourcers, agencies, umbrella companies, consultancies and digital talent platforms.

The penalties

The civil penalty for a first breach is up to £45,000 for each worker, rising to £60,000 for a repeat breach. Those figures were raised in February 2024 from £15,000 and £20,000, and the new regime applies them across the extended chain. A genuine end user that does not contract to supply the work onwards may fall outside the extended liability, but every intermediary between that end user and the worker is inside it.

The practical rule that follows is the one agencies and umbrellas have found hardest to accept: a check cannot be delegated. Home Office guidance is explicit that an employer must not rely on a third party's check to establish its own statutory excuse. An agency that places a worker through an umbrella must run its own check, and the umbrella must run another. A worker who moves between umbrellas, which the joint and several liability rules introduced in April have made more common, will be checked again at each move.

Substitution

For the contractor working through a personal service company the significant passage concerns substitution. A right to send a substitute has been the single most valuable clause in an IR35 defence since the rule was introduced in 2000, because it goes to personal service. From October, a client or agency that accepts a substitute without checking the substitute's right to work is exposed to the penalty. Olliver sets out five things a contractor's company will need to be able to show: a right to work check on any substitute, no delegation of that check, verification before work begins, contractual provisions that enforce it, and ongoing assurance for the length of the engagement.

The likely consequence is that substitution clauses will be scrutinised more closely rather than less. An engager that has to accept liability for a substitute's immigration status will want to know who the substitute is before agreeing the clause, which is exactly the kind of prior approval that HMRC argues makes a substitution right unreal. The two regimes pull in opposite directions, and the contractor sits between them.

What to prepare

The advice to contractors is administrative. Have the evidence ready before an assignment starts: an eligible passport or a Home Office share code for those with digital status. Expect to be checked more than once. Where the company genuinely uses substitutes, build the checking process into the company's own procedures now, because the client will ask to see it.

The Home Office has published no estimate of how many businesses the extension brings into scope. The recruitment industry's own estimate is all of them.