IR35 VAT-Registered Workers – AP and Payroll Integration

Our client engages workers directly who are deemed inside IR35. Some of these workers are VAT registered and issue VAT invoices. The challenge we face is:

• We need to deduct PAYE and NI through Payroll for these IR35 workers.
• Payroll and AP do not integrate automatically, so the client has requested to make these adjustments in Accounts Payable using withholding tax functionality.
• We also need to retain VAT on the invoice for reclaim and reporting purposes.

Has anyone implemented a solution for this scenario? Specifically:

• How do you process invoices from IR35 VAT-registered workers in AP?
• Any best practices for applying withholding tax for PAYE/NI while keeping VAT intact?