HMRC has firmed up off-payroll legislation with new guidance issued in April.
With more employers and recruiters exploring IR35 solutions, HMRC has issued new guidance on Statement of Work to help them and contractors to avoid future liabilities.
“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,” said Julia Kermode of IWORK, a champion of independent workers and former CEO of the FCSA.
“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.”
Clarke Bowles, Director of Strategic Sales at Parasol Group observes that the new guidance from HMRC on SOW has come at an interesting time.
“It would seem to be a reaction to some of the behaviours we’ve seen across the industry since the IR35 reforms in April,” he said. “How you assess IR35 is exactly the same for SOW as it is for any other engagement. Therefore, if something is genuinely outside of IR35 so long as it is accurately and fairly assessed it will be outside for both as it should always reflect the contracts and working practices, so there is an argument that actually getting to the root of the issue and amending contracts and working practices could be a better approach for many and one worth considering.
“Using a Statement of Work for genuinely outsourced services is a sensible way to ensure that expectations and responsibilities of parties are agreed and documented if it reflects the reality of commercial arrangements. However, as a way to circumvent the reforms, it is inappropriate and introduces unnecessary risk.”
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