IR35
10.31.2019
By: Laura Nixon

The banks taking an extreme approach to IR35

Most contractors know by now that from 6th April 2020, medium and large businesses will be responsible for administering IR35 status, with the tax liability also transferring from the contractor to the party in charge of paying the worker.

What remains more of a mystery, however, is the way private sector companies will react. Will businesses make accurate IR35 determinations? Will they adopt blanket decisions? Will they stop working with contractors altogether as a result of changes?

Well, over the past few months a picture of the way a handful of banks and financial services firms plan to approach changes has emerged. And while it’s not believed this is a course of action all businesses will take, most PSC contractors working with Lloyds, Barclays, HSBC and one or two other financial services businesses have been told they will not be able to continue working outside IR35.

In this article, we take a look at the companies that have set out their stall and explain what it means for contractors engaged by them.

Lloyds Bank

As reported by the Financial Times, Lloyds began telling its contractor workforce in early October that, due to IR35 reform, their contracts will not be extended past March 2020 in their current form.

Instead, contractors have a choice. Those who are offered permanent positions can become employees, while independent workers who opt to stay must work through an umbrella company, where the IR35 rules do not apply. The contractors who do not want to move onto the payroll, either as employees or via an umbrella, have been told they can leave.

Barclays

In an email sent to ‘UK line managers’ but circulated online, Barclays stated it “will no longer engage contractors who provide their services via a personal services company, limited company or other intermediary.” The bank said as “a consequence” of IR35 reform, from 1st January 2020, it will “engage contractors on a PAYE basis only for new or renewed contracts.”

Contractors working on existing projects were told at the beginning of October that Barclays will not extend their projects past February next year, which would mean the bank doesn’t need to assess IR35 status when reform arrives in April 2020.

HSBC

HSBC was one of the first to make its plans for reform clear. As reported by Contractor UK, in May, the bank told all contractors at its key units (HSBC Digital being one), that it will only extend their contract one more time, then they must become employees or leave. Presumably, this final extension will not lead past April 2020, when the bank will become responsible (and often liable) for IR35.

According to reports, the bank has, however, chosen to keep a select few of its contractors, who will be allowed to continue working as contractors, but only through a “third-party”, such as an umbrella company.

Tesco Bank

Tesco Bank was said to have outlined its IR35 strategy very recently, taking a similar approach to other banks. These reports state that contractors whose engagement runs past April 2020 can continue working with there, but must accept the following: that they will be placed inside IR35 and cannot negotiate a rate rise to balance out the costs.

IR35 commentators believe Tesco Bank will be more inclined to engage consultancy businesses that provide ‘contracted out’ services via a ‘Statement of Work’. This is because consultancies will be responsible for determining the IR35 status of contractors they provide.

Similar intentions signalled

High-street banks aside, Morgan Stanley made the decision fairly early on that it will not take on any more contractors outside IR35 from October 2019. Reports say the American firm gave contractors an ultimatum: leave immediately or accept an inside IR35 contract which, after 22 months, will be replaced with an employment contract. In a similar move, it has been said that wealth advisor, M&G Investments, will stop engaging contractors from December 2019.

What can contractors do?

Given these decisions sound like they come from higher up and form part of these financial services firms’ overall strategy, it could prove difficult for contractors to convince their clients to keep them on outside IR35.

The positive to take, assuming there is something good to come from this, is that the businesses handing contractors ultimatums seem to be in their few. As it stands, experts remain confident that many private sector businesses will continue to engage contractors outside the legislation in years to come.

Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.





How can SJD Accountancy help?


Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.

Call us

Call our best advice team on 01925 597 051.

  • Monday - Thursday (8am to 8pm)
  • Friday (8am to 7pm)
  • Saturday (10am to 4pm)

Existing client?

If you're already a client of ours, you can speak to your dedicated accountant directly.

Alternatively, call us on 01442 353 466.

Monday - Friday (9am to 5pm)

Call back

Let us call you back at a time that suits you

Time