For those of you who have started to look at the changes to IR35 and what the introduction of the off-payroll working legislation means for your organisation, it can be a little daunting; even more so if you haven't yet started the process.

In terms of where to start, we would suggest considering if the contract is one for "fully contracted out services". Careful auditing is required however, if the contracts are genuinely fully contracted out services then there is no requirement to do a status assessment for these contracts as the organisation entering the contract is not treated as a "client" for the purpose of the off-payroll working rules. Remembering that it is now the client's responsibility to assess the contract to determine the correct status for off-payroll working purposes.

Under the terms of a genuinely fully contracted out service, the worker is providing their services to the service provider: the party to which the contract has been contracted out to. Your organisation is engaging the service provider rather than entering a meaningful contract for the supply of a worker.

How do we recognise a potential "full contracted out service"?

Like the status determination for off-payroll working there are a number of factors to be weighed up against one another; unlike off-payroll working there is no helpful HMRC CEST tool. Like off-payroll working, the commercial reality of the contract is crucial, not simply the terms of the written contract, in respect of relevant factors, which include:

  • The service provider is responsible for agreeing the specification and pricing, we well as ensuring the quality of the service.
  • The supply by the service provider may also involve the provision of goods, material as well as labour.
  • The party which controls the worker, is responsible for working hours, shifts and pay structures of the worker.
  •  There is no personal provision of service by the worker to the engaging organisation.

Contracts with these indicators will still need careful auditing and a nuanced approach. To the extent that you are comfortable that services provided are genuinely fully contracted out, then it can help significantly reduce the volume of work for the organisation as well as the risk. A less daunting task for you.

Our IR35 hub has information about the changes to IR35 and the move to off-payroll working which can help you manage the change in your organisation.

Contributor

Karen Davidson

Partner