What exactly is a blanket determination?
It’s quite simple really, it’s when all contractors working for a particular client are automatically placed inside or outside of IR35 irrespective of any difference to their working conditions.
The major issue with them is that they often get the decision wrong, as an IR35 determination is made up of lots of key factors that are difficult to consider on a blanket basis. It is also worth noting that they go against guidance from the HMRC, more on that below.
There are several risks behind blanket based IR35 assessments, which include:
- The first thing to consider is that they do not constitute ‘reasonable care’ and as such they breach a legislative requirement associated with IR35
- Blanket banning PSC’s could end up costing the end-client a lot more money, as if they still require contractors to complete the project there’s a good chance that they’ll have to pay them an increased rate to do so Inside IR35
- Blanket determinations are uninsurable, leaving the entire supply chain at risk to the advances of the HMRC
- End-clients could lose out on the best talent altogether as true contractors turn their backs on them if they’re only willing to offer inside iR35 assignments
- Individual assessments if done correctly limit enquiries to the last 4 tax years, however blanket assessments could lead to an extension of the enquiry to 6 tax years as it could be deemed as ‘carelessness’ by the HMRC
- Contractors can also challenge a blanket determination through an end hirer led disagreement process if they believe they’ve been wrongly deemed inside IR35. The end client must respond to a disagreement within 45 with the reasons that they disagree, or with a new Status Determination Statement.
What’s reasonable care?
Unfortunately, the definition is relatively vague, however it is generally agreed upon by experts that reasonable care constitutes:
- Taking appropriate advice, from a legal professional or accountant
- Making a full assessment on an individual basis
Which is why blanket statements do not constitute as taking reasonable care
So, what’s best practice?
Individual IR35 assessments with full insurable Status Determinations Statements should be the standard that all end clients adhere to post-April 2021 to ensure that they not only cover their own legal requirements, but to ensure that they can continue to work with the best talent going forwards.
If you’re an agency, contractor or end-client it is imperative that you are not part of a supply chain that is determining IR35 statuses of contracts based on blanket determinations. By doing so you leave yourself completely exposed to the HMRC. Individual assessments aren’t as daunting and time consuming as you may think, and the money saved from completing one will be repaid tenfold throughout the assignment.
If you have any questions feel free to contact us at [email protected] or call 0161 833 1044.
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