TFL bans limited company contractors!

The lack of clarity, and in my view, real-world workability, of the new off-payroll in the public sector reforms, has now resulted in the first high profile ‘ban’ on contractors working through their own personal service company.

To remind you, under the reforms, public bodies will become responsible for the decision of assessing whether their ltd company contractors are inside IR35 (traditionally this has been a decision for the contractor). If they are deemed to be inside, then the public body, or agency if there is one, is responsible for the deduction of tax and NI at source.

HMRC seems to think it will be simple to use their new decision tool (with almost 60 questions, covering the structure of the PSC as well as details of the assignment) to decide the status, bearing in mind this tool may be available within a week or two of the go live, the public sector organisation won't have all the information required on the PSC, and after a decade and a half of case law it is still not particularly black and white as to when one is inside or outside of IR35!! With potentially hundreds of thousands of contractors to assess, this is quite some task.

Transport for London (TFL) is pre-empting the mayhem by banning all contractors unless they are working through an umbrella company – as these fall outside the issue due to the fact that the worker is taxed at source as an employee of the umbrella company. This will mean TFL avoids the time in using the HMRC tool, and also remove any risk of an incorrect decision.

I just wonder if this is a sign of things to come over the next couple of months. Will the public sector simply ban PSCs?