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Why has my agency forced me inside IR35?

My agency insists I work inside IR35, but why?

Q. Although changes to the off-payroll working rules were delayed by one year (which came as a huge relief), the agency I work through has insisted that all contractors it places with a particular client sign new terms and agree to work inside IR35. According to my end-client, this is not something they have asked for, and so they have advised us to speak directly to our agency. Why would an agency insist that contractors work inside IR35 at such an unsettling time?

A. While it’s difficult to be certain, it sounds as though the agency you work through has implemented its risk-averse strategy for IR35 reform now despite the 12-month delay. 

Why might an agency do this? Well, they may decide to only place contractors on projects inside IR35 because in many cases they will carry the IR35 liability. In other words, the agency could carry the risk as the fee-payer in the supply chain when the changes are finally implemented in April 2021. 

If this is the case, it is a particularly short-sighted approach to IR35 reform. The fact that your agency looks to have taken this course of action despite the delay to IR35 changes is also somewhat surprising. After all, everyone has 12 more months to prepare for changes and to ensure they are ready to make well-informed IR35 status decisions that allow genuine contractors to work outside the legislation beyond April 2021. 

From your explanation, it could now be policy for your agency to only place contractors inside IR35 on certain projects with specific clients. Granted, your end-client may not have asked for this, but given they will pay employers’ NI on any inside IR35 contracts, it’s a decision that also concerns them financially. So while your end-client might not be the driver of this approach, it’s very unlikely that it would have been decided without their permission or involvement.

You are left with a handful of choices, although we are sensitive that this is far from the ideal situation. You can stress to your agency the importance of allowing genuine contractors to work outside IR35 – after an IR35 contract review where possible. If fellow contractors feel the same way you do, consider approaching your agency (and indeed your end-client) together – strength in numbers may help them rethink. 

This answer was provided by IR35 specialist, Qdos Contractor.

By Contractor Doctor

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2 thoughts on “Why has my agency forced me inside IR35?”

  1. Sam

    Nobody should have any rights to force any one to sign a contract or document. Since IR35 hasn’t become a law, this should be treated as unlawful.

  2. Skip

    I think anyone carrying on next year as ‘outside’, whose client/agency would have classified them rightly or wrongly as ‘Inside’ had the delay not incurred, is taking a very big risk that HMRC will look into their 20/21 and earlier Tax affairs.

    Despite being confident as outside (true consultancy, day or so a week, working when it suits from home) I quit early March from large corporate client to avoid their ‘Blanket’ assessment and this risk.

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