Consultancy moves to ban PSCs over IR35 change

A defence firm has become the first private sector outfit to react to April’s off-payroll rules for the public sector by moving to ban workers who are limited companies.

The firm, which has contracts with the Ministry of Defence, told the “hundreds” of ‘Ltd’ workers it currently has on-site that they must soon switch to an umbrella company or quit, a source said.

The ultimatum is either because the firm fears being caught by the April rules (which can apply to private consultancies), or because it believes Budget 2017 will extend them to commercial outfits.

“There have been some suggestions that it has something to do with IR35 and risk-aversion,” said the source, who claimed the firm won’t put its ultimatum in writing.  

“Contracting as a ‘Ltd’ company has never been a problem for this firm up until now; they have been offering contracts to PSCs, through an agency, for years.”

An affected contractor was told on Friday that the firm and their main agency will no longer offer contract renewal to “any” contractor that operates through their own limited company.

Whether it was a miscommunication or another stand-down (TfL ‘backtracked’ after imposing its own blanket ban on PSCs), the contractor this week received some reassurance.

“I’m now told I can get a three-month renewal as a ‘Ltd,’” the PSC said. “But after that [it’s] switch to umbrella or PAYE or leave. If I switch now, then I will get a 12-month renewal.”

The PSC tried to get an explanation “in writing” but the firm’s staff refused. A bunch of other PSCs working alongside it suspect the firm is jumping before being pushed by the chancellor.

“There has been some comment that the [firm is] choosing to react now rather than wait and see [if the public sector’s off-payroll rules are extended to the private sector],” the PSC said.

“I’m unsure about the hundreds of other contractors on-site, but I'm going to take the three-month renewal and weigh up my options including looking for another contract elsewhere.”