HMRC state in their guidance that clients who receive ‘outsourced’ services will be exempt from the IR35 legislation regarding the changes laid out in the off-payroll rules, however this doesn’t mean you are immediately out of the woods as soon as you sign a statement of work contract.
You have to be able to show that the services you are receiving are genuinely outsourced. If you are proven to be actually receiving a provision of labour, then the responsibility for determining IR35 status remains with you. Simply signing on the dotted line will not be enough to immediately transfer IR35 responsibility and therefore mitigate the related risk to your company. If a statement of work is in place, this should be a genuine reflection of the services you are receiving.
Being able to evidence due diligence in this manner will prove its weight in gold should HMRC decide to investigate your business.
You should ensure that you are fulfilling your obligations under IR35 – if you failed to take due consideration when assessing if the engagement between you and your supplier is out of scope of the legislation, you could be failing your obligations under ‘reasonable care’ and in turn assume responsibility of the fee-payer, and therefore be liable for any unpaid tax on any engagements which should have been assessed.
Both the client and supplier must be in agreement as to their opinion of the arrangement. This means you should have that agreement in writing, and it should include specific details of exactly who will manage the responsibility for IR35. Remember that there are some illegitimate suppliers out there who claim to be selling an outside-of-IR35 golden ticket. You should be seeking to engage only with credible, respected, and well-versed organisations who have a background in providing genuine outsourced services.
We can help you solidify your stance as a business receiving genuine outsourced services.