What is a contracted out service?

A contracted out service is where an organisation receives services from a third party, like an outsourcing compmay.

This is relevant for the NHS for a number of reasons:

1. Outsourcing in this way is encouraged by Westminster
2. Public sector bodies can reclaim VAT on these services under section 41(3) of the VAT Act 1994
3. The organisation receiving the services is not required to apply the off-payroll working rule (IR35). This responsibility falls to the organisation supplying the services.

In order to know if you're a buying a contracted out service, there are a few things to take into consideration.

1. The nature of the business you're buying the services from
   • Are you getting Digital Transformation Services from a Digital Transformation Service Integrator OR Digital Transformation Services from a Recruitment Company?
   • The nature of any business can easily be determined on Companies House by looking at its Standard Industrial Classification (SIC)
2. The contract
   • Does the supplier profit when they do what they say they will do, when or before they said they'd do it?
   • Has the supplier agreed the specification and quality standards with you?
   • Are they supplying goods, materials and labour?
3. What happens in practice?
   • How much does the service provider or the customer control the worker? Who benefits from the work done and to what extent is the risk shared?

If you want to know more about this subject the following links are very helpful:

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10010

https://www.gov.uk/hmrc-internal-manuals/vat-government-and-public-bodies/vatgpb9720

https://www.gov.uk/guidance/off-payroll-working-for-clients

https://find-and-update.company-information.service.gov.uk/company/11397316