Companies Take ‘Official’ and ‘Unofficial’ Action on IR35

14th January, 2020
By 14. January 2020Finance, IR35, News
Companies Take ‘Official’ and ‘Unofficial’ Action on IR35

As the April deadline for rolling out IR35 to the private sector draws closer, the confusion surrounding the reformed legislation continues to grow. It’s little surprise then, that the number of businesses seeking to minimise their liability risk with blanket policy shows no sign of diminishing.

In theory, the government has vetoed the use of blanket policy, as it doesn’t demonstrate that ‘reasonable care’ has been taken in making a status determination. However, HMRC’s active condoning of role-based assessments in the public sector has encouraged a number of variations on a theme.

The recent ‘no PSC’ policy adopted by many private sector companies has seen thousands of limited company contractors faced with the option of going onto the payroll or leaving. Large-scale companies such as HSBC, Lloyds and GSK opted out of having to make any IR35 determinations by simply deciding not to engage limited companies for the time being.

These actions sparked widespread criticism, and other companies seemed to take stock, issuing public statements that they would be individually assessing their contractor workforce. Balfour Beatty, Wood Group and Sainsbury’s all went on the record saying that they’d use CEST and independent audits to determine IR35 status on a contract-by-contract basis – the question is, will they?

One contractor website tried to keep up with Sainsbury’s ‘official’ and ‘unofficial’ policies as the supermarket chain’s internal communications appeared to conflict with their public statements. While an initial article, based on information from a Sainsbury’s contractor, ran with the news that Sainsbury’s was adopting a ‘no PSC’ policy, this was swiftly rectified after the Sainsbury’s press office refuted the claim.

A subsequent article entitled “Sainsbury’s IR35 Delight for Contractors” apologised for the mix up, while confirming that the supermarket would use CEST to make individual determinations. Although of limited reassurance given that the tool is notoriously unreliable, it at least indicated that the company was attempting to toe the line.

Unfortunately the contractor’s “delight” was short-lived, with a third and final article entitled “Contractors Hopes Dashed” revealing that, although Sainsbury’s were taking the official line that they were using CEST, their contractors had been spoken to in advance and warned that almost all would certainly fall inside IR35.

After all this backwarding and forwarding, it’s clear that the outcome will be the same whether CEST is used or not. While Sainsbury’s may or may not individually assess each and every contract with the tool, or merely engage in a cut and paste job as a token gesture to satisfy a forgone conclusion, is almost impossible to say.

Although it’s likely that a select handful of contractors will be allowed to continue operating through their limited companies, these engagers clearly aren’t willing to engage in negotiations for the majority. In all but the clearest cut of cases, companies won’t seek to make their working practices more IR35 compliant because they simply don’t have the guidance on how to do this in time for the reforms.

As time goes on, the disruption and cost to companies is likely to force changes. The supply chain can’t realistically sustain this many contractors as employees, while contractors who choose to leave will take vital knowledge and skills with them. With an IR35 review announced by the government on January 7th, many companies and their contractors will be hoping for workable amendments to the legislation. Until then, contractors are being told to take the initiative and use an umbrella company, which will automatically remove the IR35 risk.

This content has been supplied by IR35 Guru.

At ContractingWISE we can offer you an IR35 solution to suit your personal circumstances. We have access to an excellent range of specialist umbrella companies, and can also help you with suspending or closing your limited company, depending on your situation. If you’ve been affected by the IR35 reforms and feel unsure about your position, get in touch with us and we’ll talk you through your options. To talk to a member of our team, call: 0203 642 8679

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