HMRC updates 'contracted out services' off-payroll guidance

HMRC has updated its off-payroll guidance to put beyond doubt that Statement of Works are not a silver bullet on IR35 which allow contractors – and clients – off the liability hook.

Also known as ‘contracted out services,’ the SoW arrangements started being widely adopted a year ago when they were warned against as one of 10 misperceptions about the rules.

But sounding suspicious on Friday, HMRC said “arrangements are being put in place” that mean some clients believe they are “no longer responsible for considering” the April 6th rules.

'Reiterates previous HMRC guidance'

Spotted by contracted-out adviser Carla Roberts, of WTT Legal, the HMRC update largely “reiterates” the department’s “previous guidance” on contracting out to a service provider.

Notably, she said, that where the parties engage in a “genuine” contracted-out service, the ‘client’ for the purposes of the rules “will be the service provider, not the end client.”

This transfer occurs as the service provider is the party that the worker is providing their services to and will most likely be the party akin to the worker's employer, Ms Roberts said.

'Be especially cautious'

Nonetheless, “be especially cautious of any that claim you do not need to consider the off-payroll working rules,” HMRC urges in the update, implying not every SoW is genuine.

Indeed, the department says that ‘whether a contract is for a fully contracted out service is a question of fact, based upon the commercial reality of the arrangements.’

“Where there is uncertainty as to who the true client is,” HMRC adds, “consideration should be given to the nature of the relevant contracts and working practices.”

Due to the complexities involved, and maybe even HMRC’s tone and language (‘make sure you apply the rules correctly’), Roberts recommended that contractors interested in SoW, like agencies or clients considering the model, should consult a professional to get tailored advice.