PSCs and Employment Rights Under Changes to IR35 Changes are coming to off payroll working and, whilst exactly how this will manifest itself remains slightly unclear, businesses are already preparing for the expected changes. One of those changes could be to directors of personal service companies (PSC), who will be able to claim employment rights if their company is deemed as an employee under the new rules. Barclays and Lloyds have already said they will not use limited companies and PSCs other than through payroll, meaning they don’t feel they don’t pass the employment status test as self-employed. Tribunal Claims The common thinking would be the PSC is not entitled to employment rights because it is a limited company and a separate legal entity. However, if bought to tribunal, it would have to be ascertained whether the claimant was an employee, worker or self-employed. Case Law There are plenty of examples going back over many years demonstrating how this law is applied. Take, for example, Catamaran Cruises Ltd. vs Williams (1994) IRLR 386 EAT, where HMRC (or the Inland Revenue to give it its contemporary title) told Catamaran Cruises that, for tax purposes, its journey men were employees. Williams was then given the chance to be paid under PAYE or provide the services through a limited company. He was advised by his accountant to become a limited company, which he called Unicorn Enterprises Ltd. Subsequently, Williams tried to claim against Catamaran Cruises for unfair dismissal. To be successful he had to convince the tribunal to disregard the limited status of the company and see him as an employee and not just a worker. Ultimately, the Employee Appeal Tribunal (EAT) said: “There is no rule of law that the importation of a limited company into a relationship such as existed in this case prevents the continuation of a contract of employment. If the true relationship is that of employer and employee, it cannot be changed by putting a different label upon it.” Conclusion Taking a case to tribunal is now free, which means contractors that have been dismissed have very little to lose - and potentially a lot to gain. For businesses it’s important to ensure you get things right and don’t end up on the losing end of a tribunal.