Contractors Sainsburys IR35 Hopes Dashed. Almost All Will Fail HMRC Test

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Contractors Sainsburys IR35 Hopes
Contractors Sainsburys IR35 Hopes

Contractors Sainsburys IR35 Hopes Dashed

It looks as if contractors Sainsburys hopes will be dashed and almost all their contractors will be inside IR35. A week ago a contractor contacted us to say they had been told that all contractors would be inside IR35. We published the following article which originally said that there would be a blanket ban on contractors.

Sainsburys Contractor IR35 Policy – All Must Go PAYE – No PSCs

Questions on Contractors Sainsburys IR35 Hopes

  1. What did Sainsburys not like about our article?
  2. What did Sainsburys Tell Me About their IR35 Policy?
  3. What did a Sainsburys contractor tell me about my article?
  4. Was the IR35 news at Sainsburys really good news for contractors?
  5. What was in Sainsburys Official Statement on their IR35 policy?
  6. What happened to contractors Sainsburys IR35 Hopes?
  7. Are Sainsburys operating a blanket ban on personal service company contractors?
  8. Why are Sainsburys IR35 testing contractors when they know they will fail?
  9. How does the future for contractors look?
  10. What will Sainsburys contractors do?

What did Sainsburys not like about our article

We got this email from Sainsburys Press Office:-

“There is a news story on the site alleging Sainsbury’s is automatically registering all contractors as IR35 – this is completely untrue. A quick call to the press office would have confirmed this.
Please can you correct the article immediately?”

As it was late Friday I emailed them back. I found that my email had been blocked.

So I phoned them.

What did Sainsburys Tell Me About their IR35 Policy

I was told that there was no blanket ban on contractors. All will be tested using HMRC’s IR35 tool Check Employment Status for Tax (CEST).

Those that are outside IR35 would be able to continue to use their personal service companies. Those that tested inside would have to go PAYE.

I told them that I was delighted with this and would happily amend the original article and write a new one with the good news.

Here at last, was a good news story for contractors. With all the big banks declaring all their contract jobs would be inside IR35 in the future and Vodafone doing the same in the telecoms sector here was some good mews at last.

I dashed off an article with this good news.

What did a Sainsburys contractor tell me about my article

I got a message from the original contractor saying that the article had been shown to him and I should have asked him first before publishing it.

He said ” The official line is that they will do individual tests but unofficially everyone will be in ir35. That’s what we’ve been told.

This was announced on batches of conference calls to contractors by the overseeing agency. It’s merely a formality that they will give the determinations individually. “.

Was the IR35 news at Sainsburys really good news for contractors

By this time several contractors had been in touch to say the article wasn’t true. One said:-

“Well, not good news, as Sainsburys have already deemed almost all roles “inside” IR35 after April after using the flawed CEST tool. So effectively a blanket ban regardless.

“This has been communicated to all of their contractors already with clear instruction that they will not be changing their minds on any decisions and there is no opportunity to appeal. This is also true for contractors hired via third party consultancy companies.”

What was in Sainsburys Official Statement on their IR35 policy

I contacted the Press Office again to put this to them. There was a ‘frank exchange of views before the Press Office said he would get a statement put out by the company which describes what was happening I agreed to that.

The official statement was sent to me within the hour. It said:-

A Sainsbury’s spokesman said: “Sainsbury’s is committed to taking the new legislation seriously. We are making individual determinations for all contractor assignments and whilst our working practices will mean that we are likely to deliver a very high number of ‘Inside IR35’ determinations, there may still be a handful of opportunities to work ‘outside of IR35’.

“Our ongoing commitment is to assess every existing and new assignment using the CEST tool, to make that determination and give clarity before an assignment begins.”

What happened to contractors Sainsburys IR35 Hopes

I asked the original contractors to comment on this and he said:-

” We had conference calls booked in batches due to the large number of people. During those calls it was widely announced to all in attendance on each call that while individual determinations would be presented, all were expected to be within IR35 and that the options were to go permanent or potentially do inside IR35 contracts via umbrellas etc.

“Regardless of whether you call that blanket or individually all under IR35 the result is the same. This message was reiterated in subsequent days by multiple line managers who had their own briefings prior to those conference calls.”

Are Sainsburys operating a blanket ban on personal service company contractors

So, the contractors who contacted me were pretty much right. There was no official blanket ban on contractors who operate outside IR35. However, the effect of this policy is much the same.

They have been told beforehand that they will fail the CEST test and will have to go PAYE. Sainsburys knows this because they know the working practices of their contractors.

Sainsburys statement says “there may still be a handful of opportunities to work ‘outside of IR35’.”

A handful is not a lot when there are hundreds of contractors there. Even at companies who operate blanket bans on PSC contractors there are a handful of contractors, mainly out and out consultants, who are still able to operate outside IR35.

So, contractors Sainsburys IR35 hopes have been dashed.

Why are Sainsburys IR35 testing contractors when they know they will fail

One wonders why they go to all the bother of testing contractors when they are telling them all but a handful will fail. Perhaps it is so there is no comeback on them in legal terms.

It looks as if one more domino has fallen, and in a new sector too.

How does the future for contractors look

The future for contractors does not look too bright at the moment after this false dawn.

Major disruption is being caused at so many of our major companies.

And all this is to bring in just £3 billion of tax over 4 years This is the equivalent of less than a tenth of a penny in the pound on income tax.

No one is calculating the cost to our major companies of these IR35 reforms No one is calculating the cost in morale terms.

Also, if contractors leave these companies they are taking with them not only their skills and experience but in depth knowledge of the companies’ business and computer systems.

What will Sainsburys contractors do

So, what will Sainsburys contractors do? According to our original source:-

“Sainsburys has clearly stated that they would not change their working practices to be outside IR35 compliant. Several of the contractors I have spoken to have committed to leaving Sainsburys ahead of April.

However, it might need to be by February in case March work falls in April’s billing. It may even be by January if they issue the determinations in January and we cannot accept them without opening ourselves up to incorrect and unfair back tax bills which would mean we’d effectively be working for free or be negative to continue working accepting those determinations.

“Quite a few people I have asked have contracts ending in March anyway so they won’t be re-signing or accepting Inside IR35 either way. “

So, contractors Sainsburys IR35 hopes have been dashed.

As a matter of interest the original bad news story has been read over 5,000 times. The good news story has been read more than 15,000 times so far. Contractors are obviously desperate for good news.

If anyone has any news on what their client companies are doing about the IR35 reforms let me know.

Is there any lesson for me in this?

Yes there is. In future I will put more credence on what is told to me by contractors.

We have a new poll asking contractors what they would do if their client company put a blanket ban on contractors who operate through personal service companies. It’s on the top right of this page. Vote now!

Please share this article using the social media buttons at the top and bottom of the page.

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