IR35 private sector reforms: Argos to offshore work of digital team in Milton Keynes to Mumbai

Argos is preparing to offshore the work of its Milton Keynes-based digital team to Mumbai, India, having determined its contractors to be working inside IR35, Computer Weekly understands.

The job responsibilities of around 50 contractors and permanent employees who make up the Argos digital team – including software developers and designers – will be affected by the offshoring decision, sources inside the department claim.

As part of its offshoring strategy, sources further claim that the company has offered the opportunity to relocate to Mumbai to those affected so they can continue performing the tasks they are currently responsible for, but no relocation package will be provided.

Computer Weekly contacted Argos for further details and received a statement from a spokesperson from its parent company Sainsbury’s, who confirmed the company has “identified opportunities” for offshoring.

“We regularly review our business to ensure we operate as efficiently and effectively as possible,” the spokesperson said in a statement.

“We have identified opportunities to upskill our colleagues while offshoring some of their current tasks. We understand this will be an unsettling time for those involved and we’re supporting them in any way we can.”

News of the offshoring strategy comes on the back of additional reports from inside Argos about the firm’s response to the incoming IR35 private sector reforms, which are understood to have resulted in the majority of its contractors being declared as working inside IR35 earlier this month.

The reforms, which come into force on 6 April 2021, will see medium-to-large private sector firms assume responsibility for determining if the limited company contractors they engage with should be taxed in the same way as permanent employees (inside IR35) or in the same way as off-payroll workers.

Sources claim the offshoring move is connected to the firm’s IR35 compliance strategy, but when Computer Weekly put this to Argos, the company spokesperson did not directly respond, only to add the company is unable to comment further at this stage as it “cannot pre-empt the consultation process”.  

Incidentally, Sainsbury’s most recent set of interim financial results, covering the 28 weeks to 19 September 2020, revealed sales at Argos were up 11% during this period, despite its standalone stores being closed for much of this time due to the Covid-19 coronavirus pandemic.

Furthermore, the firm’s flexible supply chain and digital platform are also credited elsewhere in the results for enabling the firm to handle the 78% uptick in online sales it experienced during this time too. However, the brand also incurred £438m of one-off costs relating to Argos store closures.

Dave Chaplin, CEO and founder of contractor tax compliance consultancy IR35 Shield, said offshoring by private sector firms looks set to increase in the lead up to the reforms coming into play, based on a poll of 3,000 contractors his firm recently completed.

More than a third (36%) of the contractors who participated in the poll said their client was moving some or all of their projects outside of the UK because of IR35.

“And the fallout will see many more UK-based contractors losing out and losing work,” Chaplin added. “As companies seek to offshore work, it will mean less money for the HM Treasury’s coffers. It’s a lose-lose situation for UK contractors, the Treasury and the UK economy overall.”

It is a trend, however, that could open up new work opportunities for contractors based overseas, he added.

“It could be good news for contractors based outside of the UK who will be viewed more favourably by firms which can rely on fully remote workers, while UK contractors may increasingly look to overseas consultancies which are not subject to the off-payroll rules.”