PwC calls firms to review IR35 status decisions, as new covid working practices bed-in

PwC has delighted contractors by advising end-users to review inside IR35 decisions, arguing covid-19 has changed working practices in three ways indicative of being outside the rule.

Responding online to its briefing, contractors called the consultancy giant’s advice for clients on Mutuality, Control and Part & Parcel “excellent,” “potential good news,” and “great.”

The hope is that ways of working introduced by clients due to the pandemic have pushed the three factors in contractors’ favour, enough to reverse inside IR35 decisions made pre-covid.

'Good evidence'

On Mutuality, firms which specialise in the April 2021 off-payroll rules (or which work under them already) told ContractorUK that PwC appears to have a very valid point.

“We agree the Mutuality of Obligations case is stronger thanks to Covid-19 if the contractor was stood down at short notice,” says advisory ReLegal Consulting. “This is good evidence”.

“More so than ever, contractors are doing more in order to keep their contracts,” says IT recruiters VIQU, indicating that such contracts are far from guaranteed in the pandemic.

“Therefore, we do agree with PwC on this point about Mutuality of Obligations, as we have seen a reduction in hours that contractors are [in the field] working, and therefore billing.”

In the briefing, MoO is said to be something that was perhaps “presumed” before February, notably where a contractor had “undertaken work for the same business for some time.”

But as contractors have seen a “significant reduction in work offered,” adds PwC, causing “higher reductions in working than employees…does this imply that there never was MOO?”

'Neutral point, even invalid'

On Part & Parcel, such differentiation from full-timers is regarded by experts as an ‘outside IR35’ signpost, but ‘covid-secure’ working practices now cover both contractors and staff.

“If all contractors work from home, it may have a [positive] bearing on the individual’s IR35 position,” reflects Qdos, a status advisory which runs IR35 contract reviews.

“However, in this [current and covid-19] scenario, it should be taken into account that many employees are also working from home.

“HMRC, therefore, could argue that this is a neutral point and perhaps even invalid [in achieving outside IR35 status], because employees are in exactly the same position.”

'WfH is a weak indicator'

ReLegal Consulting’s founder Rebecca Seeley Harris echoed: “Working from home has become a weaker indicator in my opinion.

“With employees working from home as well, and probably not having a Christmas party either, this does not help to differentiate between inside or outside IR35.”

The ex-OTS adviser was part referring to PwC listing possible aspects of the workplace for contractors (like covid cancelling a festive bash) that make them ‘distinguishable’ from staff.

'Good for borderline cases'

On Control, ‘WfH’ is central to the consultancy giant’s call in its briefing that end-users “need to review” their outside IR35 determinations, as “lockdown” may have changed them.

James Poyser, the founder of, believes PwC’s argument seems to be that less control may be present due to people potentially affected by IR35 now working from home.

“This could be good news for borderline cases,” says Poyser, boss of inniAccounts.

“Firms [that] engaged PwC for IR35 assessments [include] Capita, Shell, L&G, Clydesdale, Virgin Money, Vertex, Seqirus, Freshfields and Riverside. We wonder if they will be advising these [nine] clients to re-evaluate.”

In the briefing, end-users are alerted to the need for “a potential change around the level of oversight and control” required for PSCs who have shown their work can be done at home “with less supervision and direction.”

'Marginal, because it's the right of control that matters'

David Kirk and Co, a niche chartered accountancy firm that specialises in employment status, isn’t convinced.

“I think the impact will be pretty marginal, unless you can show that the amount of control really is different,” says the firm’s founder David Kirk.

“Remember that it is the right of control that matters. I doubt that that will have changed much [since the pandemic began].”

'Coronavirus isn't a silver bullet for contractors'

On the frontline, recruiters agree that the appearance of flexibility due to the coronavirus does not alter who calls the shots, contractually. Matt Collingwood, VIQU’s boss explains:

“If a contract states ‘the client site’ [as the work location], even if the contractor is currently working from home, if coronavirus disappeared tomorrow, the client might want them to go on site. Therefore, the contractor is under the control of the client.”

Similarly, he said, in terms of personnel exerting ‘SDC,’ if a manager is currently managing the contractor in the same way as pre-covid-19, “this won’t impact IR35 determinations.”

“So overall we don’t think coronavirus is going to be a silver bullet for contractors,” the recruitment boss said, having been shown the PwC briefing.

“That said,[the ongoing pandemic] is encouraging some clients to rethink contracts. For example, we have seen some clients write contracts not stating, ‘site location’ or saying the contractor has ‘flexibility to choose.’”

'A need to reassess'

Whether that rethink about parts of the paperwork results in a rethink of status remains to be seen, according to Qdos chief executive Seb Maley.

“Most clients haven’t started to consider the impact of covid-19 on working practices and, in turn, IR35 status,” he said.

“However, that’s not to say it won’t or shouldn’t be a consideration in time. Significant changes to a contractor’s working practices [introduced because of the pandemic] could indeed affect IR35 status, meaning there may be a need to reassess.”

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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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