IR35: What is a Statement of Work?

Since the introduction of IR35 reform in the public sector (2017) and private sector (2021), Statements of Work (SoW) have been considered to offer end-clients greater certainty when engaging contractors.

This is because they are generally used to support a a service which is fully-contracted out, as opposed to just a supply of labour. In this instance, the responsibility to determine an IR35 status is no longer required by the end-client, but shifts instead to the outsourcing agency, who assume full responsibility for the provision and management of the services, rather than just the supply of the labour. However, some workers are concerned about whether a Statement of Work provides a viable alternative to traditional contracting arrangements and any potential adverse outcomes.

In this article, we’ll take you through everything you need to know about Statements of Work and point you in the direction of some valuable resources, including Statement of Work examples and Statement of Work templates.

What is a Statement of Work?

In short, a Statement of Work is a contractual document confirming what a worker will deliver for the client under the terms of the arrangement. Produced at the start of a project, it outlines each deliverable element. This sets out in specific terms what needs to be achieved, and the timeframe in which it needs to be done.

While workers on a contract for services will work on a time basis – either at an agreed hourly or daily rate – a Statement of Work is generally used on a project basis, with the overall fee for the project broken down and assigned across the deliverables. Delivering those items set out in the SoW is usually necessary before any payment can be made.

Advantages and disadvantages of a Statement of Work

Where a service is genuinely outsourced, the responsibility to determine the IR35 status of the assignment sits with the outsourcing company (rather than the end client) and a Statement of Work can certainly support this, especially where it also sits alongside 2 of the other key parts of Outside IR35 determinations, Client Control and Substitution.

However, in terms of IR35, the Statement of Work on its own will not automatically negate the rules, as, like anything else, it will be the true nature of the working practice and relationship that should be considered. For IR35 not to be a genuine consideration, the  Statement of Work must be correctly structured and constitute genuinely outsourced work. Should HMRC deem that an SoW was not a genuinely outsourced service, the end client may be at risk of becoming liable for unpaid taxes for failing to provide a Status Determination Statement and so they may still choose to produce an SDS, even when working with a SoW.

Outside of IR35, there’s also one significant disadvantage to bear in mind. Payment is conditional on delivering against the milestones agreed in the Statement of Work, meaning that you may not benefit from regular weekly or monthly income, or even lose out completely on payment for any undelivered work.

What should a Statement of Work include?

A Statement of Work should include each milestone or deliverable, as well as the time and date it will be delivered, and the details of who will provide the work and who will sign it off. There are some best practices that you can follow to ensure that your Statement of Work is clear, as any ambiguity could lead to confusion.

Projects sometimes tend to spin out beyond their original scope, so having defined boundaries and milestones is essential to keep everyone aligned and to protect you from carrying out work that may go unpaid, especially if it’s not covered by the project's scope. By breaking down each step of the project into small, manageable elements – and working with the client to define each milestone and deliverable – you can set clear expectations about what you’ll deliver and when.

If you need some help getting started, here’s a Statement of Work template from

What's the difference between a Statement of Work and a Scope of Work?

While both are often shortened to SoW, a Statement of Work is different to a Scope of Work. The Scope of Work defines what the project encompasses, which can help you avoid working outside of the ‘scope’ of the project – which may present issues and tax considerations. If HMRC investigated a Statement of Work contract, they would look at working practices, rather than focusing solely on the SoW. As such, working outside the project scope may carry tax implications.

A Scope of Work can be part of a Statement of Work or a standalone document if the client or project doesn’t need a complete Statement of Work.

Is a Statement of Work a legal document?

Yes, a Statement of Work is considered contractual, making it a legal, binding document.

To recap

To summarise, then, a Statement of Work is a document outlining in detail everything a worker will deliver for a business. However, it is only deemed legitimate when the provision of labour is genuinely outsourced. Under a Statement of Work, the liability for IR35 shifts to the outsourcing agent, rather than the end client, with the agent responsible for overseeing the completion of the deliverables agreed in the SoW.

For more information, guidance and support around IR35, or to find out if an umbrella solution is right for you, please request a callback and a member of the team will be in touch.

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