I think that's a part of the answer.
Another part is that HMRC's interpretation of the rules is wrong, and has been shown to be in court many times. However, by making that interpretation the basis for CEST and scaring companies with the prospect of expensive investigations and large tax bills, they get their way even though it is not in line with the law.
I don't blame companies for their approach, especially Ltd bans. On the one hand, they can spend lots of man-hours assessing each contractor individually, and then risk said investigations and tax bills by accurately confirming an inside IR35 status. On the other, they can ban Ltds, take a hit on those who leave, and hope to recruit from the newly-available talent pool. Both approaches carry risk, but the second looks less scary.
Biting the hand that feeds IT
