Accenture Avanade IR35 Decision – No More Contractors Using PSCs

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Accenture Avanade IR35 Decision
Accenture Avanade IR35 Decision

Accenture Avanade IR35 Decision

The Accenture Avanade IR35 decision is a huge blow for the contracting profession. Accenture use hundreds and hundreds of contractors via Avanade and via other companies.

The contractors at Avanade have been contacted and informed that Avanade will be introducing a new way of working with agency workers from now on. They said this was due to the IR35 rules which come into force in April.

The memo says that from February 28th, agency workers will only be taken on by Avanade / Accenture on a PAYE basis. No contractors from that date will be able to operate via their personal services companies.

Contractor Questions on Accenture Avanade IR35 Decision

  1. Why are Accenture / Avanade doing this to their contractors?
  2. What will Avanade’s contractors do?
  3. What Options are Accenture / Avanade giving their contractors?
  4. How big a blow is this to the contracting profession?
  5. Why are companies making the decision to get rid of their PSC contractors?
  6. Who decides whether contractors are being assessed correctly for IR35?
  7. How will the Accenture Avanade IR35 Decision affect the flexible workforce?

Why are Accenture / Avanade doing this to their contractors

Avanade say that agency workers are a vital part of their workforce. So they are – so why are they going to force so many of their vital workforce to quit.

Contractors there say that they fear that they will come under investigation by HMRC if they continue to do a job that is now considered inside IR35 by Avanade.

Avanade will not extend the contracts of those contractors using personal services companies beyond February 25th.

What will Avanade’s contractors do

I’m told that, internally, at Avanade, they realise that many of their contractors will now leave.

This will be a huge blow to Accenture across many companies as they receive large fees for all of those contractors who are going to leave.

Perhaps it is being forced on them as clients insist on those they hire via third parties must be ‘IR35 compliant’ too. We know of at least one such company who are doing this.

There could be a huge financial hit to Accenture if they have miscalculated and a lot of their contractors don’t take up their offer of much reduced take home pay and a possible HMRC investigation for back taxes.

Those contractors who choose to stay with Accenture / Avanade will get new PAYE or Umbrella Company contracts which will start from March 1st.

What Options are Accenture / Avanade giving their contractors

The Avanade options they are giving contractors are:-

  1. Move to PAYE through the agency
  2. Use an umbrella company
  3. Leave

Contractors will be given only till January 31st to make up their minds if they want to take up Avanade’s offer or would prefer to leave.

How big a blow is this to the contracting profession

  This is a huge blow for the contracting profession. Accenture are a major user of contractors across lots and lots of client companies. You would have thought that they would be big enough and strong enough to be able to stand up to the Government.

After all, they could have just tested their contractors and allowed those contractors who passed to continue to use IR35.

The big fear appears to be the potential financial penalties that companies could get if they got their IR35 assessments wrong.

Why are companies making the decision to get rid of their PSC contractors

Companies now have the job of assessing whether a contractor is inside or outside IR35.

If the company get it wrong they could be liable for back tax, penalties and interest for maybe hundreds of contractors.

It appears that companies do not want to take this gamble.

HMRC gave a guarantee that if a contractor passes their IR35 test, Check Employment Status for Tax (CEST) HMRC would not come after the company for their back tax even if it was later shown that the contractor was really inside IR35.

They had one caveat and that was that the data had to be entered correctly.

So, the NHS went ahead and tested all their contractor using the CEST tool.

Now they have been fined £4.3m for the ‘misuse’ of the CEST tool.

Who decides whether contractors are being assessed correctly for IR35

HMRC are the sole arbiters of who is using the CEST tool correctly and who is not. The tool itself is widely discredited as not truly representing the IR35 laws It is just what HMRC interpret them to be It has no legal basis.

Indeed, HMRC’s lack of understanding of the IR35 laws is shown up at tribunals as they lose 80% of the cases they bring against contractors.

So wiht HMRC being the police, judge, jury and appeal judge of who is inside IR35 and who isn’t, many of our largest companies have opted for a safety first decision.

How will the Accenture Avanade IR35 Decision affect the flexible workforce

This will crucify the flexible workforce that the Government praises so highly.

It would be a good idea if the main parties were asked how many MPs they have who have an IT background. If it is not nil it would be pretty close to nil. I don’t know of any.

Yet this is the industry of the future.

But there will be no future of they don’t keeping using IR35 to screw contractors up. How can our IT firms remain competitive worldwide when our own Government is doing its best to screw them up?

If Accenture cannot make them see the error of their ways, no one can.

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