Conducting a risk assessment
End clients may engage with various consultancies on a day-to-day basis and outsource various projects, by which the supply chain may become more complex.
It’s crucial that risk assessments and due diligence are conducted to review the supply chain and the engagement. This ensures the supplier is working on a genuinely outsourced/contracted out service. If the engagement is not deemed to be a genuine outsourced service, this may result in a consequent tax risk for the end client.
When assessing the engagement, it is key to not only ensure that the MSA and the SOW are in line with an outsourced services but also that the working practices reflect the contractual position.
It is also important to remember that not all time and materials engagements can be shoehorned into a SOW and it is only appropriate for project-based work. To be exempt from the off-payroll, the SOW must reflect the reality of the engagement. If work is provided under a SOW but there is still an element of personal service, HMRC is likely to consider it an employment relationship.
