Q. Like many contractors, in the lead up to 6th April, I was subject to a blanket IR35 determination. My client took the decision to place all contractors it engages inside IR35 even though I’m confident that my contract belonged outside the legislation. Firstly, blanketing is unlawful, is it not? And secondly, given IR35 reform in the private sector has been placed on hold for 12 months, can my client insist that I work inside the rules?
A. Blanket IR35 determinations are not compliant because they lack ‘reasonable care’, which must be taken when deciding a contractor’s status. That’s not to say this has stopped firms from doing it though, with thousands of contractors thought to have been placed inside IR35 without a fair and proper assessment of their contract or working practices.
However, while a business mustn’t blanket-place all contractors inside IR35 irrespective of their status, HMRC will allow a group of individuals with identical terms and conditions to be assessed as one. Needless to say, this has muddied the waters regarding blanketing. The existing confusion over what is and isn’t a blanket determination may have led a number of private sector firms to place all contractors inside the rules thinking they are following the guidelines. Of course, judging by reports, there are plenty of other companies that must know it’s not compliant but have carried them out regardless.
Whilst our recent research shows that 32% of those subject to a blanket decision have now seen this retracted by their client, there are unfortunately a number of businesses that intend to uphold them. These companies have set out their stall early and do not seem willing to engage contractors outside IR35. This is despite businesses having been handed another year to prepare for the arrival of reform. As frustrating as this is, companies are within their rights to only engage contractors inside IR35. That said, we are optimistic that the delay will encourage businesses to rethink their strategy.
So to recap, blanket IR35 determinations are not allowed. However, decisions made when contractors’ contractual terms are identical are deemed acceptable by HMRC – this is something that at Qdos we disagree with entirely. IR35 determinations should be made on a case-by-case basis, with the contract examined along with the contractor’s working practices.
When it comes to whether a company will engage contractors outside IR35, if a firm chooses not to, then this is ultimately their choice. Although, this is a short-sighted and needless approach in our opinion.
This answer was provided by IR35 specialist, Qdos Contractor.