Writing a confirmation of arrangements letter: What you need to know

With the continuing debate around off-payroll rules, contractors need to keep themselves informed of the latest developments in order to safeguard themselves. In this article, Umbrella Exchange take a look at how to write a confirmation of arrangements letter, and how this can offer contractors an extra layer of protection.

In the event of an IR35 inquiry, HMRC will attempt to establish the true relationship between the contractor and the end client in order to determine employments status. As many contracts are generic, the investigating officer will often place more emphasis on what’s known as the ‘hypothetical contract,’ formed by the impressions they gather about the day-to-day working practices of the contractor while on a given assignment.

A signed letter that confirms the working arrangements between the contractor and the end client is a valuable piece of evidence in an IR35 investigation. Confirmation of arrangements letters can be used to clarify the independent nature of the contractor by referring to their rights of substitution and control. A confirmation letter may include the following clauses

• Start and finish date for the work that is to be undertaken by the contractor with details of hourly/daily/fixed rate
• Specification of services supplied by the contractor and the right of the contractor to determine how, when and where these services will be carried out (with reasonable adherence to the client’s guidelines)
• Acknowledgement that the contractor is required to carry professional indemnity and public liability insurance and would rectify any faulty work at their own cost
• Acknowledgement that there is no payment for periods during which work has not been undertaken
• The contractor has no expectation of further work from the client; if further work is requested it will require an additional quote and the contractor is under no obligation to accept this work
• The contractor has the unconditional right to terminate the contract at any time

Although the letter is not a legally binding document, it demonstrates that you have taken reasonable care to confirm your self-employed status with the client, and that they have acknowledged this. The confirmation of arrangements letter will reduce HMRC’s need to pursue the end client as it provides a record of the contractor’s working arrangements signed by someone who was present at the time of the assignment. The following tips are useful in order for the letter to carry maximum weight.

• Write a confirmation letter for each contract, if you use a template make sure you add/delete       relevant clauses
• Ideally, the letter should be written on your own business stationary
• The letter should be signed by someone directly involved with the contractor’s provision of services at the time of the assignment
• Consider getting the confirmation of arrangements letter professionally reviewed

Umbrella Exchange can provide assistance with every aspect of contracting. To talk to a member of our team call 0203 393 3881