By Sophie Clayton
In the run up to April’s off-payroll reforms, many companies are adopting policies which place all contractors inside IR35 without performing individual tests, something which has become known as a ‘blanket ban’.
This may seem like a risk-avoidance tactic, but is it really the best option for end clients? We’ve listed some of the major risks behind applying such ‘blanket bans’ below.
You’ll be non-compliant with the legislation
Let’s get straight to the point. HMRC released a number of updates in February 2020, including a long-awaited definition of reasonable care, which makes it explicitly clear that blanket assessments are not OK.
According to the draft legislation, determining all workers to be ‘inside’ IR35 without carrying out individual assessments falls foul of your reasonable care requirements, which means the responsibility for the deduction of PAYE tax and national insurance falls to you.
So, whilst you might think that putting all your contractors ‘inside’ IR35 is the easiest way to avoid risking a large tax bill, the reality is it’s far from it.
Your talent won’t hang around for long
Many clients aren’t thinking about the bigger picture here. Whilst the changes to the legislation will catch a number of contractors who do work as disguised employees, let’s not forget about those who are legitimate businesses in their own right.
By determining all your contractors to be inside without fairly assessing them, you risk giving incorrect status determinations to freelance workers who are working outside of IR35 legitimately. And trust us, they won’t be hanging around for long; they’ll take their services to a client willing to assess them fairly.
You’ll find it harder to recruit in the future
Freelance workers are a vital component of many of our industries. They offer high levels of skill, can often be immediately available, and the ability to hire and off-hire them with ease provides companies with a convenient way to deal with ebbs and flows of project workload.
As the dust settles with IR35, many companies will begin to accept that there are ways to engage with contractors legitimately outside of IR35, enabling them to continue to secure the best talent on the market. Clients who continue to pose blanket bans on PSCs risk missing out on this, as those who do engage with some workers on an outside basis will be the far more attractive option.
With projects to complete and targets to meet, is it really worth the risk?
If you’re an end client and you need assistance with your IR35 strategy, ATA can help. Contact us today on IR35@ata-recruitment.co.uk for more information.