Can contractors with public sector engagements and who are in scope (deemed employment) for IR35 purposes be furloughed?
Contractors working for public sector organisations who are deemed employees for IR35 purposes may be eligible to be furloughed provided they are paid via PAYE. In this scenario the agreement to furlough would be made between the contractor’s personal service company (PSC) and the fee payer (usually the agency). The parties would agree that the contractor will carry out no work for the public sector organisation while furloughed and the fee payer would apply for the grant.
At the moment the guidance states that in order to be eligible a claim for furlough must have to have been submitted by 31 July 2020 for a period of 3 weeks between 1 March and 30 June 2020.
Related FAQs
The CMA is particularly concerned about certain activities, its guidance highlights:
- Exchange of commercially sensitive information where this is not necessary in response to the crisis
- Collaboration which unfairly excludes third parties
- Abuse of a dominant position (including a dominant position held as a result of the crisis) – particularly to charge excessive prices
- Seeking to maintain prices or prevent reductions in prices
- Cooperation going beyond what is necessary to respond to the crisis in the interests of consumers
No one factor will determine status and the outcomes will differ depending on the nature of the work being carried out and the business of the end user client.
When you have carried out an assessment based on the relevant factors you can either get in touch with us to discuss further, check your answers against HMRC’s CEST tool or do both before making a final determination.
If you consider the factors used to determine status you can include the following terms that are more in line with a self-employed relationship:
- The right to provide a substitute of the contractor’s choice in the event the individual is not able to perform the services;
- The ability to work for other businesses as long as doing so will not affect the services to be provided by the contractor;
- The contractor should have sufficient control over how, when and where (if possible) they provide the services;
- A degree of financial risk can be included for unsatisfactory work or failing to complete a project or task
We have terms that cover all of these points that can be tailored to your needs. The consultancy agreement is included in our IR35 toolkit.
If the debts owed to you pre-date Covid-19 and your debtor seemed unable to pay well before the Covid-19 pandemic took place, it is entirely possible that you will be able to present a petition on the grounds that the debtor would have been unable to pay its debts even if the Covid-19 had no effect on its financial position. We do not yet have any reliable precedent as to how the Courts are likely to deal with such cases. Whether you are likely to succeed will depend on the exact circumstances of the debt and your debtor. There has been one case decided in August 2020 where the Court concluded that Covid-19 did not have a financial effect upon the debtor and that the circumstances which gave rise to the petition had arisen long before Covid and would have occurred in any event. A winding up order was made in that case. What we do know about the court’s approach is that the purpose of the Act is to allow viable companies to trade through the current times and the Court is likely to set the bar high.
Please contact us if there a debt you would like to discuss. Even if presenting a winding up petition is not available for now, there may still be other forms of legal proceedings that you can use to collect money owed to you, like county court proceedings.
As a result of the CJRS being extended, the Job Retention Bonus will no longer be paid in February 2021.