In their Employer Bulletin published last week, HMRC included guidance on contracted out services and statements of work. In essence, there has been a marked increase in the number of “IR35 Solutions” purporting to be the answer in relation to off-payroll legislation purely by engaging workers via a contracted out service and/or statement of work. HMRC are clamping down on such arrangements where they are not genuine, and their employer bulletin states:
“You must make sure that you understand what constitutes a fully contracted out service if you believe you may not be the client responsible for considering the off-payroll working rules, or if you are being asked to agree to these arrangements.”
The guidance goes on to warn that “if the true nature of the service being provided is a supply of labour, then any written terms will not change this fact”.
In other words, the reality of the arrangements should be carefully examined to ensure that the contract has not simply been re-labelled as a service when in reality what’s being provided is a source of labour. Such arrangements are particularly being promoted as an opportunity to circumvent the off-payroll legislation in the hope that contracts need not be assessed as inside/outside IR35, and therefore that workers can be paid gross.
Julia Kermode of IWORK, champion of independent workers said:
“I’m aware of many incidents where statements of work are wrongly seen as a magic bullet to disapply off-payroll legislation and there has been a sharp increase in supposed ‘IR35 solutions’ which are simply a change in contractual wording in how someone is engaged. My advice is simple – be very wary of these models.
“If a service is genuinely contracted out then a statement of work is perfectly acceptable, however simply amending the contractual wording in isolation does not achieve this and it is likely that you will need to consider the off-payroll working rules. There is no work around or solution to off-payroll, and the sooner everyone realises that the better.”