Companies Reverse Blanket Policies Following IR35 Delay

31st March, 2020
By 31. March 2020Articles, Finance, IR35
Companies Reverse Blanket Policies Following IR35 Delay

Many of the companies who adopted blanket IR35 policies that forced contractors out of their limited companies and onto the payroll are reversing their decisions. The U-turn came after news that the government would be delaying the reforms until April 2021 in order to help businesses and contractors cope with the impact of coronavirus.

The delay of the reforms means that in the private sector, responsibility for making IR35 determinations will remain with the contractor, instead of passing to the end-client. Given that the delay came just weeks before the reforms were due to take place on April 6th, many end-clients had already taken action. In a significant number of cases, businesses were panicked into non-compliant policies that blanketed contractors inside IR35.

What do the IR35 reversals mean?

The reversal depends on what action was taken by the company in the first place. If your private sector client has already issued a Status Determination Statement (SDS) it should be ignored. It has no bearing on the contractor’s employment or tax status, and HMRC has said it will not seek to find out if an SDS has been issued or what it said. SDSs, CEST, trackers, emails will all be deleted using GDPR ‘right to be forgotten’.

Where a company adopted a blanket policy such as a PSC ban, an industry post on the 24thshowed that 70 companies have now deferred their IR35 decisions. These include Sainsbury’s, Balfour Beatty and Deutsche Bank. In most cases the deferral will mean that contractor can continue to work through their PSCs where they have not already taken action, or re-open them if they have moved to an umbrella company.

For contractors who have had their contracts terminated by end-clients, it is up to the end-client whether to reengage them or not. Similarly, if contractors have accepted a permanent contract of employment, the decision to allow workers to go back to contracting is down to the end-client. In many cases, these decisions will depend on the current requirements of the individual company.

Contractors should note that not all companies are reversing their previous IR35 policies. 23 companies have confirmed that they will not reverse their PSC bans, including IBM and Lloyds, and will push ahead with their blanket IR35 policy. The decisions of the other 164 companies who banned PSCs are not yet known. However it could be difficult for some companies to reverse their decision, depending on how far down the line of reform they have gone. Companies that choose not to reverse blanket decisions are likely to experience a high flight risk from contractors who now have more options to choose from.

What about IR35 in the future?

Although some remain skeptical that HMRC won’t use public knowledge of companies that adopted a blanket ban to pursue them at a later date, this seems unlikely. The vast majority of the blanket policies that were introduced didn’t accurately reflect a contractor’s true employment status, and in this respect they would be of limited use to HMRC in targeting genuine non-compliancy. There are also those who feel that, as the delay is temporary, the government will seek to implement the reforms in 2021 without the benefit of the ‘soft landing’ promised by the Chancellor in February. This is also hypothetical, given that a damaged economy could greatly benefit from a skilled and flexible workforce as the threat of coronavirus subsides.

However, contractors should still exercise caution given that delay only applies to the reforms, and not the current legislation, which will continue to be actively enforced. This means that in the private sector contractors will still have to consider the IR35 status of their engagements and accept tax liability for any incorrect determinations. In the public sector the client will continue to determine the IR35 status of the engagement, as they have done since 2017.

This content has been supplied by IR35 Guru

If you’ve been affected by the Off-Payroll reforms or if you’re unsure about your employment status, ContractingWise can help you make sense of your options. We have a range of hassle free services that can help you re-open your limited company, or find the right umbrella company for you. To talk to a member of our team, call: 0203 642 8679

Tags: , , ,