Statement of works - is something rotten?

An often repeated comment is that when it comes to IR35, a “solution” to the challenges associated with workers supplied via agencies is to use a Statement of Works (SOWs).?This is not to say SOWs cannot be effective but some comments I have heard are no more than “just rename your agreement as a Statement of Works and IR35 goes away”.?Hmmm.?Of course changing something’s name only does not change its substance - as Shakespeare wrote “A rose by any other name” etc etc.?Or more pertinently in this context and still mangling the words of the Bard: is this train of thought simply “Cold wisdom waiting on superfluous folly?”

Of course for something to be a genuine and effective Statement of Works and therefore be considered to be a supply of a service rather than a supply of labour, the facts have to support that. This discourse is not about how to structure compliant SOWs to manage IR35 risks as this will depend on the circumstances and the business need driving the requirement to hire contingent workers.?

Instead there is another point to consider around SOWs which can be easily overlooked but is becoming a common line of enquiry for HMRC.?In a nutshell, it involves workers being provided ultimately by an overseas entity even though the end engager may have contracted with a UK business. The workers provided through the arrangements in question had been engaged via offshore intermediaries and therefore, while IR35 might not be in point due to it being a properly constituted SOW, the Host Employers legislation (in force since 2014) can be applicable instead – creating a PAYE/NIC obligation on whoever manages the workers.?Simply considering the arrangement as a SOW and therefore not needing to be concerned with IR35 (or other employment tax matters) may be a very costly error and a more thorough examination of the facts is required.?

In summary, do you your supply chain due diligence, check your contracts and ensure that you are clear on who is operating any withholding tax and who is liable in the event that PAYE/NIC etc isn’t operated correctly.?Do the homework upfront and be thorough, for all that glisters is not gold.