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Clients reverse blanket bans on PSCs during Off-Payroll deferral

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Major hirers of contractors who implemented blanket bans on contractors operating through limited companies due to the planned extension of IR35 reforms to the private sector earlier in the year have been reversing such policies due to the subsequent postponement of the reforms, a contractor insurance firm has reported.

The reforms, known officially as the Off-Payroll rules, were implemented in the public sector in 2017. They were planned to be rolled out to the private sector in April but the roll-out was delayed for twelve months due to the outbreak of Covid-19.

In an alarming move, due to the substantial administrative burden that the rules place on the hirers of contractors, many major firms opted to simply stop using limited company contractors, or classify them all as “inside IR35” – so called “blanket assessments”.

According to a recent survey of recruitment businesses by Kingsbridge Contractor Insurance, however, thirty-five per cent of end-clients have since changed these policies and are now hiring limited company contractors again.

High-profile clients who put blanket bans on the use of Personal Service Companies (PSCs) included HSBC, Barclays, Vodafone, GlaxoSmithKline and BAE Systems. The research by Kingsbridge did not name the companies that have reversed blanketing policies.

Clients are also less likely to use the official IR35 status checker, CEST, which has been plagued by inaccuracies and widely criticised as unfit for purpose. Just eighteen per cent of respondents indicated that they were planning to use it when Off-Payoll does eventually get implemented, compared to thirty-one per cent who used it in the run up to April.

“It’s hugely encouraging to see so many businesses reversing the blanket bans that were originally imposed, and we hope that more follow suit as organisations begin working with staffing companies to prepare and truly get it right this time around,” said Thomas Wynne of Kingsbridge Group. “With contingent labour likely to play an even bigger role in the UK economy over the coming few years as companies seek flexible resources in an uncertain market, it is more critical than ever that robust processes are in place that allow talent to be engaged in a compliant way.”

Ann Swain, from The Association of Professional Staffing Companies (APSCo), a recruitment trade body, said: “We know that access to skilled, flexible contractors has long been a strong contributor to the UK economy. They are highly skilled and utilise their expertise to carry out a specific assignment, helping firms to adapt, evolve and achieve success and these contractors will be especially important throughout the post-coronavirus economic recovery.

“While the Government has delayed the roll out until next year to avoid economic disruption during the Covid crisis, we believe that this is simply delaying severe disruption to the self-employed workforce and is likely to further damage an already fragile economy.”

9th September 2020.