Cabinet Office issues guide and clauses for tackling off-payroll contractors

The Cabinet Office has issued a guide to help Whitehall departments seek assurances about the tax arrangements of their contractors, together with illustrative contractual clauses.

The move is part of the implementation of the review of the tax arrangements of public appointees, which was published by the Treasury on 23 May 2012.

The review was set up by the Chief Secretary of the Treasury after a row over individual appointees who were off the pay roll.

Departments were expected to have implemented the review’s recommendations within three months of publication.

The Cabinet Office said in a policy note that appropriate clauses would be inserted into new contracts from 23 August 2012 and all contract renewals carried out after that date.

Similar clauses are to be inserted into the relevant existing Government Procurement Service Framework Agreements (i.e. CIPHER) and in the new central Framework Agreements for Contingent Labour. The latter will be tendered later in the year.

The Cabinet Office said Government departments should also seek to apply the recommendations of the review to existing relevant contracts, “subject to ensuring value for money”, and should work with their legal teams to do this.

The key conclusions from the Treasury’s review were that:

• The most senior staff must be on the payroll, unless there were exceptional temporary circumstances, which would require Accounting Officer sign-off and could not last longer than six months;
• Departments must be able to seek formal assurance from contractors with off payroll arrangements lasting more than six months and costing over £220 per day that income tax and national insurance obligations were being met. Departments should terminate the contract if that assurance was not provided. Departments also had the option of extending this requirement to other contractors as they believed appropriate;
• Implementation would be monitored carefully with financial sanctions for departments that did not comply.

“Departments should now use the guide and illustrative clauses to implement the recommendations of the review, ensuring they work closely with their colleagues in Finance and HR, and with their legal teams,” the Cabinet Office said.

It added that the clauses had been drafted on an illustrative basis “and are not intended to be implemented in any contract without a thorough review involving (a) the individual department’s governance and (where applicable) information sharing practices and (b) a review of the contracting parties in the particular circumstances (including tripartite arrangements) and termination provisions”.

The Treasury is to carry out a monitoring process in April 2013, which will include requests for a range of information. Departments will also be required to report to Parliament on the issue.

A copy of the policy note can be obtained here. 

Philip Hoult