IR35 news: FTSE 100 companies accused of "demonising" self-employed contractors

Sky, Jaguar Land Rover, Three and HSBC are said to be sidestepping IR35 rules with unfair policies

IR35 at a glance

IR35 is a piece of legislation designed to tackle tax avoidance from 'disguised employment' where self-employed contractors set up limited companies to pay themselves through dividends, which are not subject to National Insurance.

It was first introduced in 1999 by then-chancellor Gordon Brown. However, as part of the November 2016 Autumn Statement, current chancellor Phillip Hammond said that public bodies using contractors would be responsible for IR35 enforcement from 6 April 2017.

It's thought that contractors could lose up to 25% of their money with IR35, according to ContractorCalculator, and as a result, almost 85% said they would consider leaving the public sector to work for private companies instead, according to a recent Qdos Contractor's survey.

The IR35 definitions are a little fuzzy, but if you work onsite with your client, who also manages you and supplies your equipment, and if you lead a team of employees that work for the client, IR35 will most likely hit you.

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This is particularly worrying for government and public bodies, as they rely heavily on IT contractors, and many of those resources would be put at risk with the IR35 rules.

Head to our What is IR35? page for a detailed breakdown of the legislation.

Latest news: FTSE 100 companies accused of "demonising" self-employed contractors

Some of the UK's biggest companies have been criticised for policies that ban the use of contractors operating under their own limited companies, in what's seen as a move to avoid scrutiny under new off-payroll tax rules arriving in April.

The new IR35 rules are due to be extended from the public sector to private companies, shifting the responsibility for determining a contractor's tax status onto the organisation that's doing the contracting.

As part of those new rules, companies will be required to ensure that they take "reasonable care when they make a determination about the employment status of a worker". This would effectively protect self-employed contractors from unfair decisions that force additional tax payments unnecessarily.

However, rather than engage with this process, some companies are treating contractors unfairly by either refusing to engage with those that operate under a limited company, or forcing contractors to work under PAYE, according to inniAccounts CEO James Poyser.

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Poyser has now urged Chancellor Sajid Javid to abandon plans to expand IR35 to the private sector, as the actions of larger companies mean that self-employed workers are now being "demonised".

"Whilst I concur with your goal to ensure that 'two individuals working in the same way pay the same tax', I find the perpetuation of this simplistic rhetoric to be counterproductive," said Poyser, in a letter to the Chancellor on Tuesday. 

"This... has resulted in large businesses pulling down the shutters on all who are self-employed. As was predicted in the 2019 consultation, companies are simply side-stepping the right to a fair determination with corporate policies that ban engaging the self-employed, and only allow employment via PAYE."

He added that recently published HMRC factsheets, which state that reforms "will not stop anyone working through a company if that suits them" and that "those who are complying with the existing rules should feel little impact", have become "mistruths".

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He also suggested that the act of banning contractors from using limited companies was "in effect... removing their status as a business owner, and demoting them to temps".

Sky, Jaguar Land Rover, Ocado Technology, GE Aviation, Three, HSBC and Quilter have all been named directly in the letter as having policies that treat contractors unfairly.

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When approached about the allegation, Jaguar Land Rover simply stated that it was following HMRC guidelines and that it is "compliant with the new IR35 legislation requirements".

 A spokesperson for HSBC UK told us: "Like many large companies, HSBC is continuing to prepare for the changes to IR35 legislation in April 2020. As part of this ongoing review, we continue to work with our suppliers to ensure they and HSBC are compliant with the incoming rules."

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