Tier 2 Lockdown Weakens PwC’s IR35 Assessment of Home Working

Tier 2 Lockdown for Many Staff Weakens PwC’s IR35 Assessment of Home Working 

Chris James, Director of Accountancy Services at Workwell and Chairman of the FCSA, comments on how the new lockdown restrictions will impact IR35 status assessments that consider home working as an indication of an ‘outside’ contract.

The article below, as featured in ContractorUK, explains in detail. 

More workers working from home thanks to London and other major cities coming under Tier 2 lockdown restrictions appears to be casting PwC’s IR35 guidance in further doubt.

At the time the advice was issued, Qdos said ‘WfH’ for contractors could actually be a neutral, even invalid ‘outside’ IR35 signpost, if employees were doing it too due to covid-19.

Since then, an increasing list of major cities and regions have been told that all their office workers, regardless of status, “who can work effectively from home, should do so over the winter.” Part of the Tier 2 restrictions, the instruction covers office workers in London, Birmingham, Leeds, Nottingham, Leicester, York, Essex and Surrey’s tax hub Elmbridge.

“If you work for an end-user whose… taking the same approach to their staff [as to PSCs by mandating WfH], it’s hardly good evidence for an outside IR35 position,” says Chris James, Director of Accounting at Workwell after Oxford University tax professor Judith Freeman said there was not much correlation, if any, between status and remote working.

Asked for their own assessment of PwC’s IR35 advice, an agency suggested that the work from home transition was more to do with end-users needing “agility and scalability” to get through the pandemic. And getting an outside IR35 determination would have more to do with other contracting hallmarks, the agency, Lorien, further suggested.

“The need for resource flexibility will also see growth in Employed Consultant, SoW and Talent Sharing models,” said the agency’s managing director Darren Topping. “Six months down the line from the legislation coming into force, we predict that organisations will start to stretch their wings with [these] different working models, and this can only be a good thing for [genuine] contingent workers.”

Also ‘a good thing,’ paradoxically, is being terminated – if an outside IR35 determination is the aim; something which the PwC advice touches upon, according to Chris James. He said: “Where contractors have had their contracts terminated early or quickly without recompense, possibly in order to keep the permanent staff employed, it would be hard not to conclude that their situation demonstrates a lack of mutuality of obligation”.

In its early October briefing, PwC said: “Before COVID-19 contractors may have worked at the client site and been largely indistinguishable from employees in some areas. But we now have a situation where they work from home…Does this change the tax position?”

“I wouldn’t get your hopes up,” one ContractorUK reader, a systems engineer answered. “I have already been told by my client that it changes nothing.”

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