Rivals compel clients to rethink their inside IR35 decisions

Their rivals not finding PSCs caught by IR35 are prompting firms which have found the rule catches their PSCs to rethink such in-force ‘inside IR35’ decisions, ContractorUK can reveal.

Such a rethink at one corporation has led to the formation of a “deep dive IR35 assessment” unit, which is designed for inside-IR35 PSCs (presumed or decided), to object to with evidence.  

The rethink is also showing up at external status advisories where, having initially helped the engager place PSCs inside the rule, such IR35 specialists are now being asked to look again.

'Our rivals have PSCs outside IR35; how can we too?'

Even where the advisory has not advised the client before, and instead the engager used CEST to produce their inside IR35 determinations, the same competitive pressure is in play.

“We’re getting lots of enquiries from non-financial [engagers] realising their rivals have told PSCs they’re outside [IR35], and they want to know what they can do to get the same result.”

Speaking on condition of anonymity, an IR35 review company also said that “many” of the organisations coming forward were “looking at losing massive parts of their business.”

'Quality of resource-pool will reduce'

A freelance PM, Philip Harris, confirmed the effects of two similar engagers with contrasting IR35 stances. “[The ‘inside’ one will] see the quality of the resource-pool reduce.

“[And the result will be] an emerging skills shortage, as skilled independent contractors will exercise their ‘flexibility’ to find different ways of working -- or leave the market,” he said.

Another contractor Owen Davies, a commercial consultant, echoed: “[It’s] disconcerting that all the emphasis is on how companies will handle ‘Off Payroll issues’ after April 2020.

“[But ] who are they going to engage with”? the consultant asked on LinkedIn. “They will end up with a compliant process but no candidates”.

'At BAE, it stinks of a set-up'

Meanwhile, at a leading defence firm, PSC contractors were assessed via CEST in December and the vast majority received ‘inside IR35’ determinations in only the last few days.

“However, other [PSCs] who do the same role, in the same office, on the same project, [have been given] outside [IR35 determinations],” says a source at the firm, BAE Systems.

“This is a shock. But it rather suggests BAE have done an exercise to ensure the specialists that they need avoid the chop. [At least that’s what] it stinks [of].”

'Far-reaching impact on freelance working'

A recruitment agency familiar with BAE’s approach, which the agency says goes against HMRC guidance because the assessments did not look at individual circumstances, reflected:  

“As the appeals process has a 45-day turnaround, anybody wishing to appeal the decision is unlikely to have any resolution before the April deadline [when the legislation takes effect].

“The impact on freelance working and major UK projects will be far-reaching without a doubt…[as] companies…[will] struggle to find specialist skills”.

'IBM's usage of PSCs -- subject to approval'

More positively, but also looking aware of its skills requirements, IBM has updated its blanket ban on PSCs by saying that “subject to approval,” some PSCs can still be engaged.

But before a “deep dive” assessment by IBM into such PSCs can begin, a long list of criteria must first be met – including that the “agency/workers” have “clear” outside-IR35 evidence.

The assessment constitutes a rethink however, as IBM initially told contractors that many would be found inside IR35, in line with Big Blue’s  initial ‘PAYE or umbrella only’ edict.

'A blanket ban by Tata'

At automotive giant Tata Motors, there’s no similar exception -- much to the disappointment of 100 contractors in Coventry.

“Here at Tata’s European Technical Centre…a blanket ban on limited company contractors has been introduced,” says one. “And no, not a single personalised letter between us.”

An Oracle contractor (unrelated to Tata) tried to see the upside -- not of blanket bans but of inside IR35 decisions, potentially on behalf of those PSCs whose engagers aren’t rethinking.

“On a positive note, if the work is found inside, then plan to use the opportunity to develop new skills, learn new things and work from home more often,” the PSC said. “The longer term effect on how we work and engage in the workplace could be far-reaching.”

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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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