Limited company bans due to IR35 reform ‘look short-lived’

The anti-limited company contractor policies being put in place by commercial outfits ahead of April’s changes to IR35 are likely to be temporary, a growing number of experts suggest.

In an online update, Qdos explained that it expected the policy U-turns of the public sector – where the changes are already in force – to mirror what will happen in the private sector.

“There were a number of risk-adverse reactions [in the public sector and a] lot of those were quite short-lived. [We] imagine that will be the case for several of these banks”, the firm said, referring to the trend started by HSBC.

'Similar to what was seen in public sector'

Reflecting on a number of “large scale users” of PSCs banning such contractors, Access Financial pointed out that the policies are not set in stone. Referring to banks, the firm said:

“[They are] saying they will not engage off-payroll workers from…April, but that may turn out to be a knee-jerk reaction similar to what was seen in the public sector.”

Kevin Austin, managing director of Access Financial, was speaking after a second large telco – Telefonica, owner of O2, yesterday joined the list of engagers halting PSC engagements.

'People are being pushed into umbrellas'

Although not referring specifically to Telefonica, where PSCs are not being extended past February, Mr Austin said: “People are being pushed towards umbrella companies which act as employment intermediaries.

“For many…this will be a suboptimal solution as they will be paying much more tax than they would if they operated their own company but won’t enjoy the same benefits and rights as permanent employees.”

The REC raised the same issue of umbrella companies yesterday, saying the need to police the intermediary sector was one of four reasons that the IR35 changes ought to be delayed.

'Brollies prospering from IR35 changes'

“A delay would allow the government to regulate umbrella companies, something which it has long-promised,” the staffing body said.

“Without this regulation we risk non-compliant umbrellas prospering, facilitated by [the] IR35 changes. This would be bad for workers and runs counter to the government’s Good Work Plan.”

One worker, Jeremy Anon, seems to agree, as he is petitioning chancellor Sajid Javid to both abolish IR35 and stop the reforms from being introduced on April 6th. Available here, the petition has currently attracted almost 15,000 signatories.

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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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