What flexibility will be lost for PSCs with IR35s new changes?

Feb 1, 2021

How much is going to change for Personal Service Companies during IR35s shift in liability? With not just the concern for a lack of control over the final determination, there is unease over what will happen to the flexibility of contracts. If deemed inside IR35 then the ability to work under your own terms, setting your own fees and hours to work, as well as being able to take on multiple contracts are not a part of the contract.  

With many benefits coming from working as a limited company outside IR35 it can be seen as an attractive position, but many of these benefits help both the contractor and client. Although the shift in who determines the status will highlight those illegitimately working outside IR35, it means it could also be putting those legitimate cases at risk. With a lack of understanding or preparation, many clients and agencies are looking to blanket ban all outside IR35 work, making it much harder for outside IR35 contracts to be found. By offering outside IR35 contracts to PSCs, we are constantly trying to match up the right work with the best talent, maintaining fairness with combining legitimate outside IR35 workers with appropriate contracts. 

When losing an outside IR35 status there are many benefits no longer available to the contractor, in addition to potentially losing 20-30% of their income.  

  • Working their own hours 
  • Taking on multiple contracts 
  • Expenses no longer covered 
  • No substitute 

With travel expenses not covered for inside IR35 contracts, there is little incentive for limited companies to work on long distance roles, restricting this flexible workforce and making it equally hard for clients to find the best talent. Being able to utilise these can help provide better skills and results to projects and attract further work in the future, benefiting both client and contractor. Causing these to be restricted has meant many contractors are prepared to find alternative roles or discontinue being a contractor altogether. In a survey conducted by Contractor Calculator of more than 12,000 contractors, 23% said they intend to quit contracting due to IR35 leading to a potentially far smaller pool of talent to choose from for clients.  

What can you do?  

Be a part of the process and make your own assessment to bring a more robust decision to your employment status and opening up the opportunity to challenge the outcome if required. As a part of this, going over any current contracts to make sure they reflect the actions you are doing in the role off paper. Just having it written in the contract may not be enough to show your status and by performing the role as described in your contract then the guidelines within which you are working are made clear. 

Status determination statements are legally required to be given to contractors under limited companies as they give the chance to challenge determinations made by the client or agency. Despite this, only 38% of respondents in a survey say they have been provided with a Status Determination Statement. While the clients, fee payers, and contractors can all make an assessment, SDS’ provide a final chance for you to get appropriate IR35 placement as clients are required to meet the 45-day challenge process. Having these three parties individually assess your role can lead to a more robust determination, alongside giving you some control within the process.  

With the concern of clients being unprepared, it is vital for YOU to have as much understanding as possible so as to be able to seek the right work for you; whether inside or outside of IR35. The initial delay for when it will come into effect has given more time, but with few companies taking advantage of that it is valuable for all involved to take action. Speak to one of our experts to gain guidance in getting a status determination reflective of your work.  

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