Royal London and Northern Trust ban PSC contractors, as IR35 reform nears
Two respected City firms have joined the growing list of banks and financial institutions banning limited company contractors due to private sector IR35 reform in 20 weeks’ time.
Northern Trust, a wealth management firm, and Royal London Asset Management, an investment firm, will no longer hire PSCs from March and February 2020, respectively.
The moves by the two firms are effectively the same, as not engaging PSC contractors means neither will need consider IR35; assess status or take the steps specified in draft legislation.
'Nothing at all'
Named this month by the FT as the best private bank in the US, Northern Trust (NT) internally said that all of its current contracts with PSCs would terminate on March 23rd.
For a new contract, the options are -- join the payroll, use an umbrella company or “nothing at all,” an agent familiar with the arrangement said last night. Northern Trust declined to comment.
Yesterday afternoon at both Royal London Asset Management and its larger parent Royal London Group, PSCs were told to use a brolly if they wanted to stay on post-February 14th.
“It’s very romantic,” scoffed the agent, at a financial services staffing house. “Not only because it falls on Valentine’s, but also because RL stressed there will be no exceptions.”
'Real gift for HMRC'
“Large companies just deciding not to use PSC contractors is a real gift for HMRC, as there’s no need to carry out any future IR35 compliance checks,” says IR35 expert Kate Cottrell.
“[As] these are all large companies, we know they have all had one-to-ones with HMRC.
“It will be interesting to see the reactions of others who have found themselves in this position. If the risks to them are too great, then no doubt many more are to follow along similar lines.”
Nicole Slowey, operations director at Qdos Contractor, sounds fed up on contractors’ behalf, from banks continually telling PSCs that they must ‘go PAYE’ in response to IR35 reform.
“The question I’d be keen to ask these banks is why they feel they can’t engage contractors compliantly outside IR35 while, at the same time, manage the risks they will often be exposed to from 6th April 2020,” she said.
“Private sector firms understandably want to protect themselves from IR35, but that doesn’t mean they cannot work with genuine contractors safely outside the scope of the legislation.”
Fortunately for affected workers, some end-users are heeding Slowey’s advice. And other mid-sized and large engagers are at least appearing to think about doing so.
Balfour Beatty, for example, has told all limited company suppliers that they are currently being assessed, so that individual decisions on their IR35 statuses can be reached.
In light of it valuing their “important contribution,” the infrastructure giant said it was working closely with PSCs, and will give “as much notice as possible” about any changes.
Similarly, energy and industrial services provider Wood Group has enlisted a tax adviser to assess its PSCs’ IR35 status, with a view to having the results ready for the “start of 2020.”
In an internal memo, the company says it won’t make contractors complete the adviser’s online status-testing tool themselves, but all tests are due to conclude by mid-December.
“It’s really pleasing that Wood plc are approaching this correctly by making individual assessments,” says Ms Cottrell, co-founder of Bauer & Cottrell, after seeing the memo.
“Only then can they identify the risks they face; be armed with evidence of the assessment and demonstrate that they have taken ‘reasonable care,’ as required by the draft legislation.”
Last week, and despite being in the industry where the PSC bans are most prevalent, Aberdeen Standard Investment suggested that it has adopted a ‘wait and see’ approach.
“Very sensibly, ASI are waiting for the draft legislation to pass before reviewing it and taking advice, including from their agencies, before formulating a plan,” a source says.
“If a plan is needed, then fine. But the firm is currently leaning towards making [IR35 status] determinations on a case-by-case basis, albeit in January and not before.”