Tier 2 lockdown for many staff weakens PwC’s IR35 assessment of home working

More workers working from home thanks to London and other major cities coming under Tier 2 lockdown restrictions appears to be casting PwC’s IR35 guidance in further doubt.

At the time the advice was issued, Qdos said ‘WfH’ for contractors could actually be a neutral, even invalid ‘outside IR35’ signpost, if employees were doing it too due to covid-19.

Since then, an increasing list of major cities and regions have been told that all their office workers, regardless of status, “who can work effectively from home, should do so over the winter.”

'Hardly good outside IR35 evidence'

Part of the Tier 2 restrictions, the instruction covers office workers in London, Birmingham, Leeds, Nottingham, Leicester, York, Essex and Surrey’s tax hub Elmbridge.

“If you work for and end-user whose… taking the same approach to their staff [as to PSCs by mandating WfH], it’s hardly good evidence for an outside IR35 position,” says JSA Services.

The contractor accounting firm was speaking after Oxford University tax professor Judith Freedman said there was not much correlation, if any, between status and remote working.

'Doesn't make a difference'

Asked about IR35 in the Treasury Select Committe's ‘Tax after Coronavirus’ enquiry, Prof Freedman said: “We should be treating them [a contractor working from home for a single engager on a two-year contract], much as anyone else working from home.

“I don’t think the fact they’re working from home makes a difference to the arguments around that.”

Asked for their own assessmnt of PwC’s IR35 advice, an agency suggested that the work from home transition was more to do with end-users needing “agility and scalability” to get through the pandemic.

'Stretch their wings'

And getting an outside IR35 determination would have more to do with other contracting hallmarks, the agency, Lorien, further suggested.

“The need for resource flexibility will also see growth in Employed Consultant, SoW and Talent Sharing models,” said the agency’s managing director Darren Topping.

“Six months down the line from the legislation coming into force, we predict that organisations will start to stretch their wings with [these] different working models, and this can only be a good thing for [genuine] contingent workers.”

'Terminated early and quickly'

Also ‘a good thing,’ paradoxically, is being terminated – if an outside IR35 determination  is the aim; something which the PwC advice touches upon, according to JSA's director of accounting Chris James.

He told ContractorUK: “Where contractors have had their contracts terminated early or quickly without recompense, possibly in order to keep the permanent staff employed, it would be hard not to conclude that their situation demonstrates a lack of mutuality of obligation”.

In its early October briefing, PwC said: “Before COVID-19 contractors may have worked at the client site and been largely indistinguishable from employees in some areas. But we now have a situation where they work from home…Does this change the tax position?”

“I wouldn’t get your hopes up,” one ContractorUK reader, a systems engineer answered. “I have already been told by my client that it changes nothing.”

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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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