Contracted-Out Service Review

Ensure you're working with genuine managed-service providers rather than labour-only providers with the help of our specialist team

What is a contracted-out service review?

A contracted-out service review provides the confidence that your compliance remains intact when using outsourced service providers, including a detailed report and recommendations.

Let's get compliant


Two key questions many companies ask in relation to the off-payroll rules are:


  1. who is responsible for making a determination, and
  2. who is liable if that determination proves to be incorrect


For traditional labour supply chains, the answers to these questions are relatively straightforward. HMRC themselves state that “in most cases it will be obvious who the client is” and that “where a person enters into a contract with an intermediary for the supply of a worker, they will be the client”.


But, as many organisations will know, this can be less clear-cut. As part of the off-payroll working rules, private sector firms must take due diligence on both their traditional labour supply chains, but also any alternative arrangements where contractors may be involved.


The Contracted-Out Service Review ascertains whether outsourced services would be considered genuinely ‘contracted-out’ under the off-payroll rules, providing businesses with confidence in their IR35 compliance when using managed service providers.

We will review any written contracts (Master Services Agreement and accompanying Statement of Works) and review both the actual working practices and the background to the engagement.

After we have built up a broad picture of the engagement in question, we will document our findings in an easy-to-read report, with our conclusions and rationale, helping you to understand what this means for you and your business going forward.

What's included in a Contracted-Out Service Review?

Policies, procedures, and processes review
Review of the policies, procedures, and processes around engaging MSPs
Supplier contract review
Review of supplier contracts and relevant Statement of Work (SoW)
Working practices review
Review of the working practices between your business and the supplier, as well as understanding the role of contractors within this
Expert opinion of the service provision
Our expert opinion whether a supplier is a genuine contracted-out service or whether they are, instead, a labour provider
A custom report
A custom report covering each supplier reviewed, including comments on both contract and working practice reviews
Suggested improvements
Improvements to solidify that a supplier’s provision is as a genuine outsourced service
Assistance with status determinations
If it is not practically possible to cement a genuine service provision, Qdos can assist you and the supplier in making individual status determinations of the workers
Re-review of any implemented changes
Re-review of any changes implemented subject to the initial review findings

Why is it so important to review your service providers?

If services are considered genuinely outsourced, the supplier of the services (i.e. the consultancy or agency) is considered to be the client under the off-payroll working rules (OPW). This means that the supplier carries the responsibility for assessing the IR35 status of its contingent workers where they operate through personal service companies.

If you failed to assess 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. This means you would be liable for any unpaid tax on any engagements which should have been assessed.


With an increase in managed service arrangements in the lead-up to IR35 reform, it's likely to be an issue HMRC target. The government’s introduction of a Targeted Anti Avoidance Rule (TAAR) in the final raft of changes to the legislation could be used as a key weapon in this area.


 Examples of arrangements where this should be considered could include (but is not necessarily limited to):


  • Consultancy firms delivering services to clients;
  • Statement of Work (SOW) based arrangements; and
  • Engineering companies delivering projects to an end user.


There are a number of factors to consider when working out if an arrangement is a fully contracted-out service.

Firstly, both the client and supplier must be in agreement as to their opinion of the arrangement. This means you should have confirmation in writing, and it should include specific details of exactly who will manage the responsibility for IR35.

Remember, illegitimate suppliers do exist and they will often claim to have an outside-IR35 golden ticket. You should be seeking to engage only with credible and respected organisations that have a background in providing genuine outsourced services.

Through adding Qdos to Lorien’s expertise in project management and contingent workforce models, we are able to offer an all-in-one solution to clients that ensures maximum compliance in addition to competitive advantage.

Darren Topping

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