Royal Bank of Scotland to halt limited company hiring from February 28th

Royal Bank of Scotland has quietly gone back on its word to ‘continue to engage PSCs under a new IR35 from April,’ by saying it will stop generally using such contractors past February.

In an internal memo seen by ContractorUK, RBS says “all existing contractors” working as limited companies must transfer to either PAYE or umbrella company by February 28th.

Although the memo was sent to RBS contractors via agencies only this month, the seed of the bank’s decision to no longer engage PSCs appears to have been sown back in early August.

In fact, instead of the usual 3-month or 6-month extensions, a few PSCs were renewed then for an atypical seven months, taking them right up to the newly announced February cut-off.

A month before, in July, RBS was rumoured to be exploring how to retain its PSCs and despite a RBS spokesman then denying such a policy, he said RBS would still use PSCs.

The one caveat he then inserted was that such a stance by RBS depended on the small print of the then-incoming draft IR35 legislation. That caveat now seems to have been acted upon.

'Behind the scenes'

“We have been working hard behind the scenes with RBS to ensure we are set up to support our workers through the necessary changes required next year,” the RBS-agency memo says.

“The government are introducing changes to IR35…this means that after 6th April 2020 most contractors won’t be able to work for RBS via their own limited company.”

Accountant Alan Broome, boss of Acumenica reflected: “Inside and outside of RBS, limited company contractors won’t welcome this news, but there is one positive as far as I can see.

“And it’s this -- that the bank has stated [via its agency in the memo] that ‘most [Ltd] contractors will not be able to work for RBS.’ That suggests at least some contractors will.”

'Other options'

The accountant said RBS’s announcement looks similar to Tesco Bank’s ‘cease and desist’ PSC policy, although the former is favouring agency PAYE or umbrella over its own payroll.

Kate Cottrell, an expert on IR35 said: “It may be that once we get Budget 2019 on November 6th , alongside the crucial details of the final legislation, that there could be other options available.

“But these – if any – will sadly be too late for many contractors where RBS and other end-clients have changed their entire engagement policy for contractors.”

Employment law firm Chartergates says that end-clients are free to make their own decisions on the draft IR35 rules, ‘based on their own risk profile and presumably following advice.’


And Andy Vessey, an ex-taxman, agrees it is clients who can decide how they wish to engage their contingent workforce. It is their “prerogative.” But, he adds, RBS have got it wrong.

“This policy is utterly short-sighted and lazy. It will only serve to drive talent to [RBS’] rivals who are willing to engage self-employed contractors, but via an outsourced supplier,” he said.

The head of tax at Larsen Howie added: “I’d like to know if RBS are going to increase rates to compensate, albeit via an agency or umbrella, for railroading [contractors] into PAYE.

“If not, then why would any current or prospective contractor want to work for them, unless work is scarce and their options are limited?”

'Contractors shouldn't panic'

A written request for RBS to comment, on aspects of its memo including whether it will raise rates and whether there are exceptions to its upcoming ban on PSCs, was not responded to.

“The hope [is] that RBS contractors have already taken on board the advice given in relation to their fellow contractors at Tesco Bank – much of that applies here,” Ms Cottrell said.

“And contractors [at RBS] should not panic, but they must use the time that they’ve now got, to get as much information as possible to enable them to make an informed decision.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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