A contractor ban at Network Rail has been reversed and the Government-backed body is now engaging with PSCs outside of IR35 once again.

It has been revealed that the national rail organisation has made an apparent U-turn on it’s original blanket ban on contractors outside IR35.

According to the Department for Transport’s (DfT) 2020/21 accounts, Network Rail has reformed it’s off-payroll compliance process so that more than 70 per cent of contractors that work with the rail operator are now engaged outside IR35.

According to these latest figures, the DfT and it’s associated executive bodies and agencies used the services of 1,912 contractors during the last financial year – of which more than half (53 per cent) were deemed to be outside of the off-payroll legislation.

More than 1,300 of these contractors worked via Network Rail, with almost three-quarters (74%) of these workers assessed as outside of IR35.

Records for the previous financial year showed that around 99 per cent of the 538 contractors the DfT engaged with had been placed inside the off-payroll rules, suggesting a seismic shift in policy within the Government department.

According to the accounts, the DfT determined IR35 status using HMRC’s Check Employment Status for Tax (CEST) tool in all cases, apart from contractors working on HS2 who were automatically classed as inside IR35.

Andy Chamberlain, Director of Policy at IPSE, said: “It’s certainly good news that Network Rail have changed tack and rowed back from their blanket inside-IR35 assessments.

“After the damage the IR35 changes have done right across the contracting sector, we can only hope this is a sign of things to come, and that more organisations – in the public and private sectors alike – will recognise the legislation does not require all engagements to be processed through payroll. Clients can hire contractors on an ‘outside IR35’ basis and do so perfectly compliantly.

“Contractors and the wider self-employed sector are a crucial part of the workforce – in times of economic crisis and recession more than ever.”

This isn’t the first time that a government department has been forced to U-turn on it’s IR35 status determinations and many hope it won’t be the last.

This news is very encouraging for contractors operating via a PSC and we hope this will give other end clients that had imposed blanket bans the impetus to overturn their decisions.

Now may be a good time to start using your limited company again as more businesses review their policies – especially if you have been on furlough during much of the pandemic.