Can Blanket Bans on PSCs Now Be Reversed?
Can You Reverse A Blanket Ban on PSCs?
Because responsibility for IR35 status determination will continue to rest with contractors until April next year, end hirers who had banned the use of PSCs could reverse their decision with relative ease. Indeed, some have already done so.
“Because the IR35 reforms will not come into force until April 2021, there would be no problem with an end hirer reversing a decision to blanket ban the use of PSC contractors and taking the time to implement individual assessments instead.” Del Williams, Sales Director.
This is likely to be beneficial for end hirers and contractors alike:
- For end hirers, it would mean that they would not face a potential skills gap as a result of losing contractors who could look for work elsewhere with end hirers who have not taken a blanketing approach.
- For contractors, it removes the frustration of being unable to work through their PSC, even though their IR35 status remained unchanged.
“The issue of IR35 compliance hasn’t gone away, of course, but end hirers certainly do have more time to properly assess and mitigate the impact of the reforms on their contractor workforce and reputation. Hopefully, by the time we get to April 2021, there is no need for any end hirer to blanket ban PSCs.” Chris James, Director of Accountancy Services and Chairman of the FCSA
To avoid the need for blanket bans, employers now have plenty of time to plan a more measured approach to compliance. This should encompass:
Individual IR35 assessments
End hirers now have the chance to implement individual IR35 assessments instead of blanket bans.
Individual IR35 assessments enable end hirers to understand the overall business impact of the new rules, particularly what proportion of contractors is genuinely ‘inside’ vs ‘outside’ IR35. This has the added benefit that only genuinely ‘inside IR35’ contractors need to be transitioned to alternative payment solutions, and ‘outside IR35’ contractors can remain working through their own PSCs, as they do now.
Without such assessments, end hirers risk driving up costs by having to pay higher rates to cover the additional employment costs of contractors who are treated as ‘inside IR35’ and have more tax to pay. They also face losing their contractor talent to competitors who are not making blanket bans.
Not only do reliable assessments mitigate these business impacts, but they also provide the assurance businesses need to continue to utilise ‘outside IR35’ contractors, particularly if the assessments are insurable as they are with our IR35 assessment tool. An altogether much less disruptive approach.
Managing ‘inside IR35’ contractors
We would recommend that end hirers do not delay the rollout of individual assessments. Status Determination Assessment results would enable end hirers to mitigate the impact by looking at whether it’s possible to alter the working practices of contractors who could be treated as ‘inside IR35’ under the new rules.
Whilst ‘outside IR35’ contractors would be able to continue to work through their PSCs, ‘inside IR35’ contractors would need to be transitioned to an alternative payment option. We offer help with switching to Umbrella, or, if you’re looking for an alternative to Umbrella, we offer an outsourced employment (PEO) service. With our outsourced employment solution, an agency simply outsources the employment and payment of workers, without any hassle and without the worker incurring extra admin fees.
Both Umbrella and PEO are likely to mean there would be more tax for the contractor to pay, which means it may be necessary to raise the contractor’s rate in order to retain them. Equally, it may be possible to review the contractor’s role with our assessment tool, and make adjustments so that they can be genuinely re-assessed as ‘outside IR35’ and legitimately able to continue to work through their own PSC. No matter which category contractors fall into, we’ll be able to offer a complete solution.
Working with the supply chain
Lack of time to work with other partners in the supply chain was cited as one of the main reasons for blanket banning PSC contractors in recent months. However, now the deadline has shifted, end hirers have more time to unravel the complexity of their supply chain and to put in place robust systems and processes to ensure compliance.
This is particularly important when it comes to ongoing assessments which may be required when a contractor’s assignment or working practices change as this may affect their IR35 status. As a result, rigorous and reliable communication methods are required to ensure the whole supply chain can work together to ensure compliance.
How can we help?
We are here to help contractors, agencies and end hirers to comply with IR35 rules and prepare for the introduction of the reforms next year. IR35 Complete from JSA comprises our full suite of solutions. There are three main components:
- Provides a firm judgment in borderline cases with results that can be insured for complete peace of mind.
- Easy to complete assessments that provide instant Status Determination Statements (SDS).
- Complete transparency and control throughout the supply chain, from end hirer to payment solution.
- Can be white-labelled for agency use with end clients.
- Provides feedback on the reasons for a determination, so that if possible, changes can be made before April 2021.
- Meets HMRC’s requirements for valid SDS.
Please get in touch for more information.