Can your client refuse to engage you through a limited company?
Since IR35 reform hit the private sector in 2021, many contractors have found their clients unwilling — or claiming to be unable — to engage them via their limited company. Some have been told their company has a blanket policy against PSCs. Others have been issued inside IR35 determinations without any apparent assessment of their individual contract. These are two very different things, and the distinction matters.
The two types of "we can't use your limited company"
Type 1: Commercial Policy (Lawful)
A blanket policy not to engage PSCs
A client or end-user can decide, as a commercial matter, that they will no longer engage contractors via personal service companies. This is a legitimate business decision. HMRC has confirmed it — a client choosing not to use PSCs at all is exercising a commercial preference, not making an IR35 determination. It's no different to a client deciding only to use employees.
This remains frustrating for contractors, but it's lawful. Many financial services firms — banks, insurers, asset managers — still have these policies in place, a legacy of the risk-averse response to 2021.
Type 2: Blanket Determination (Non-Compliant)
A blanket inside IR35 determination across all contractors
This is different. If a client does engage contractors via limited companies but makes a blanket inside IR35 determination — applying the same status to all contractors without individual assessment — that is non-compliant. HMRC has been explicit: blanket determinations across large contractor populations are not acceptable.
Every contractor engaged via a PSC is entitled to an individual Status Determination Statement (SDS) based on the specifics of their engagement.
What is a Status Determination Statement?
An SDS is the document a medium or large client must provide to each contractor setting out their IR35 status and the reasoning behind it. It must be provided before the first payment on a contract. Without a valid SDS, the liability for any PAYE due sits with the end client.
Key protections built into the SDS process:
- Contractors have the right to challenge an SDS they disagree with using the formal dispute process
- The client must have a process for handling disputes
- If the client fails to respond to a challenge within 45 days, the liability reverts to them
What contractors can do
If you're in a situation where a client has refused PSC engagement or issued an SDS you disagree with:
- Ask for an SDS if one hasn't been provided. If one doesn't exist, the client bears the PAYE liability.
- Challenge an SDS you disagree with using the formal dispute process. You're entitled to submit a written challenge explaining why you believe the determination is wrong.
- If a blanket determination has been applied (i.e. the same status for all contractors with no individual reasoning), raise it with the client. This is a compliance failure on their part.
- Document everything. Keep copies of the SDS, your challenge, correspondence. If HMRC later investigates, a contractor who can show they challenged an incorrect determination and didn't receive an adequate response is in a stronger position.
Unsure of your IR35 status?
An AutoBooks accountant can review your contract and advise on your position.
Talk to an AutoBooks Accountant →PSC bans in financial services — the current picture
Many banks and insurers still operate blanket no-PSC policies. These are legally permissible but increasingly being reviewed as:
- The JSL rules for umbrellas create new agency and client liability
- The economic cost of umbrella arrangements has increased (higher employer NICs)
- Outside IR35 is becoming viable again for more roles as the market matures
Contractors working in financial services who are told "we don't engage PSCs" may want to explore whether that policy is actively reviewed or simply legacy. Some firms are quietly reopening limited company engagements on a case-by-case basis.
What this means if you're looking for outside IR35 work
The market has shifted. Blanket no-PSC and blanket-inside policies drove many contractors to umbrella in 2021–2023. But five years on, compliance understanding has matured, set-off rules have reduced the liability risk for fee-payers, and the umbrella JSL rules are prompting a rethink. Outside IR35 engagements via limited company are becoming more available.
If your current client or agency won't move from inside IR35 or has a blanket PSC ban, it may be worth exploring whether the market has opened up elsewhere in your sector.
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Frequently Asked Questions
Can a client refuse to engage me through my limited company?
Yes — a client can make a commercial decision not to engage personal service companies. This is legally permissible. However, if a client does engage limited company contractors, they must provide an individual Status Determination Statement for each contractor. Blanket inside IR35 determinations without individual assessment are non-compliant.
What is a Status Determination Statement?
An SDS is a written document a medium or large end-client must provide before the first payment on a contract, setting out whether the contractor is inside or outside IR35 and explaining the reasons. Contractors can formally challenge an SDS they disagree with.
What happens if I don't receive an SDS?
If a valid SDS has not been issued, the liability for any PAYE due falls on the end client — not the agency or contractor. Contractors should ask for their SDS at the start of any new engagement.
Are blanket inside IR35 determinations legal?
No. HMRC has confirmed that making blanket determinations across large contractor populations without individual assessment is non-compliant. Every PSC contractor is entitled to an individual assessment based on their specific contract and working arrangements.
Why do so many financial services firms ban PSCs?
Most PSC bans in financial services were introduced after the April 2021 IR35 reforms as a risk-management measure — simpler to ban PSC engagement than to run individual assessments. These policies are legally permissible as commercial decisions, but many are now being reviewed as the market matures and the cost of umbrella arrangements has increased.