Network Rail announces all PSCs as outside IR35

Network Rail has become the first organisation affected by the new off-payroll rules to take the atypical step of declaring its entire PSC workforce outside IR35.

In fact, almost 150 roles that the rail operator engages external workers to execute have been given the green-light that the reformed Intermediaries legislation “does not apply.”

Everyone from Litter Pickers to Senior Technical Officers are covered by the ‘outside’ determination, which Network Rail made after status testing before the rules bit on April 6th.

‘Could change at any time’

More crucially in terms of timing, all the determinations were individually made before the IR35 digital tool was altered, so re-running the tool today might not return the same results.  

“As the HMRC tool is being continually reviewed…the current determination could change at any time,” Network Rail acknowledges in a breakdown of the roles, sent to affected staff.

“If the tool or the [HMRC] guidance surrounding the tool changes, Network Rail will rerun the tool on the below roles and send a new determination out.”

‘Voting with their feet’

At the time of writing, however, a re-run is not thought to have happened. And Network Rail did not respond to a request to confirm that a second determination has not been issued.

“[Clients] just didn’t have the time [yet],” an IR35 expert says. “Network Rail wanted to stop folks voting with their feet… [but] the tool has changed, so it should be doing it all again”.

Mindful of HMRC rules, including the ‘reasonable care’ clause, the rail operator says each of the 150 roles were assessed for IR35 individually, and that it used “used the HMRC tool”.

‘IR35-compliant payment’

But elsewhere in the public sector, the tool is being rejected. “I have been deemed to be outside of IR35 via the ESS but it seems I’m still obliged to go down the PAYE or umbrella company route,” a PSC said.

Elaborating to ContractorUK with documents to prove his claims, the PSC said the agency relayed the client’s ‘outside’ decision, but said the agency would not be honouring it.

HMRC has not “guaranteed” it will stand by the ESS’s results, justified the agency (at odds with what HMRC has stated), so you -- the PSC -- can only receive an “IR35-compliant payment.”


A status advisory consulted about the recruiter’s refusal to accept the ESS’s result says staffing agencies are disregarding the IR35 tool’s ‘outside’ results “all the time”.

“We have a crazy bit of tax law where a decision rests with one party but the liability with another,” the advisory said. “Why would an agency take the risk if it does not have to?” 

This risk-averse stance is why a former tax official believes that Friday’s first en masse payment to PSCs since the April 6th rules bit will “uncover some nasty shocks” for many.

‘Reduced rates’

Paid as an individual plus PAYE; paid with NI and PAYE deducted or paid a big percentage less to cover employer NI and ‘holiday accrual’ are among the surprises, the ex-officer says.

Or perhaps, in a dispute because of not being paid at all: “My agency would not pay my limited company for the work carried out week-ending March 31st,” one PSC said last night. 

“Maybe I didn't ask enough questions but they informed me that I have no option [to get paid as a limited company] … and they did not consult me about reducing my day rate.” 

Or as one ContractorUK Forum user explains, the surprise may be getting paid -- wrongly -- as a PSC because the worker has switched to working through an umbrella company.

“[It] took them four working days to sort… [and it] came out to approx. 15% less”, recalls the worker. “[Bar] overheads that I still need to cover and expenses I wasn't able to claim back.”

‘Not happy’

Another worse-off contractor whose ‘due date’ has already come up also posted on the forum: “I've attempted to negotiate with the client and agent.

“[I sought] an increase to the daily rate so that I'm not taking the full hit, [but] so far I've only been able to get 30% of the amount I'm set to lose. Not happy.”

But the exact opposite is happening too. “This client had wholesale contractor bail out,” another forum user wrote. “Worked out well for me though because [the] client realised they had to up the rate -- and did by 30%, plus.”


Seb Maley, chief executive of Qdos reflected: “Such is the chaos among public sector bodies and agencies, that the door is open for contractors to challenge decisions.”

Maley was actually referring not to rates, but to status, where his firm is seeing “numerous instances” of PSCs being deemed inside IR35, then re-assessed, and found outside IR35.

“In our experience, quite often the reversing of decisions seems to be down to political pressure rather than a change to any specific circumstances,” he said.  

‘Clients U-turning’

Although welcome in the eyes of contractors wanting to keep as a PSC, Maley described it all as a “strange, worrying situation, where nobody seems to really know what’s going on.”

The chaos has been confirmed by recruiters, which say last-minute changes of heart – whether on rates or status or both – did not help smooth the transition to the new framework

Andy Hallett, commercial director of SThree said: “Certainly [we] saw a few clients U-turn last week, based upon order[s] from on-high or finance and HR jumping in late on.”

‘One in five is blanket assessing’

At about the same time (on the eve of the rules biting), almost one in five clients had blanket ‘inside’ IR35 assessments in place, according to Harvey Nash Recruitment Solutions. 

The recruitment firm’s Colin Morley also told ContractorUK: “Considering the framework restrictions in the public sector, we'd expect the number [of PSCs] opting purely for private sector positions to rise, as they realise their fee requirements very often can't be met.”

Edicts stating IR35 applies to all off-payroll posts (Network Rail has said it doesn’t apply to any of its posts) can save time and money for agencies and clients, but only if ‘reasonable care’ can be evidenced.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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