Banks to Block IR35 Contractors After IR35 Changes
UK banks Barclays and Lloyds appear to have followed the example set by HSBC and others by blocking the engagement of limited company contractors when private sector IR35 reforms take effect.
A letter sent by Barclays to contractors suggests that the bank will stop using personal service company (PSC) contractors and tax all contractors in the same way as salaried employees.
As a consequence of IR35, the letter states, “Barclays will no longer engage contractors who provide their services via a personal services company, limited company or other intermediary.”
It continues: “Instead, Barclays will engage on a PAYE basis only for new or renewed contracts.”
Other large companies including Morgan Stanley, M&G Investments and GlaxoSmithKline have already indicated that they will cease and desist all PSC engagements.
New IR35 rules affecting PSC contractors will be introduced in the private sector in April 2020. The rules will mirror reforms introduced in the public sector in 2017, meaning that responsibility for determining the IR35 status of a contract will shift from the contractor to the private sector end-client.
By apparently refusing to engage PSC contractors, these large firms are effectively opting out of the IR35 framework. Instead, they appear set to go PAYE-only and use alternative arrangements like umbrella companies to recruit contractors on a short term basis.
Contractors that use an umbrella company or another PAYE arrangement will pay the same amount of personal tax as contractors that are classed as 'inside-IR35', but they will also enjoy other statutory employment rights.
Miles Grady, Director of Umbrella.co.uk, said: “With a high degree of uncertainty over how the new rules will be enforced, large companies like Barclays and HSBC appear set on insulating themselves completely from the damaging IR35 reforms.
“We don’t expect this to become the norm, however, and it could mean that these big firms miss out on the best talent when it comes to recruiting contractors, because most will be competing for more lucrative ‘outside-IR35’ contracts. Contracting through an umbrella company will remain an attractive proposition for any contractors that are classed as ‘inside-IR35’.”
For more information about IR35 and how you can stay compliant, speak to a member of the Umbrella.co.uk team today. Call: 0800 121 6513.