Contractors put under review at Santander, banned at JP Morgan, Low Level Waste Ltd
Fears that organisations’ IR35 reform-induced ‘cease and desist’ policies on limited company contractors will spread have been realised, albeit in a different direction than envisaged.
In fact, instead of other telcos following in Vodafone’s footsteps, the PSC bans are now taking hold at a least one other bank, and also being adopted by the nuclear waste sector.
So JP Morgan is now PAYE-only for existing and new hires from March and January respectively, and Santander is eyeing the same policy from April, but says it is yet to decide.
An IR35 adviser condemned: “All in all, just like the roll out of the rules in the public sector, the whole thing is being rushed through, notably by those who are banning PSCs.
“This benefits only HMRC. It is wrong to make such major changes when there is no hope of seeing what the actual rules are until it is too late to deal with them.”
Asked about the banking sector’s stance on PSCs, an agency staffing director – who also declined to be named said: “It does seem like the larger the firm, the more chance there is of them taking the blanket ban approach, at least initially.
“As the draft legislation relates to payments made after April 5th 2020 any blanket approach would need to be effective from February 2020-time, as there is bound to be a lengthy supply chain with such large employers.
“[As large users of contractors, the banks] will want to ensure that payments have filtered through the multiple layers to their end-recipients in good time for the deadline in April.”
But at Qdos Contractor, the belief is that end-users should be using the 17 weeks they have got between now and the scheduled start of IR35 reform completely differently.
“Given IR35 reform can be managed, it’s unnecessary for any company to force contractors onto the payroll one way or another,” the status review firm said.
“Should this happen, these firms will lose out on the specialist skills, important flexibility and savings achieved when compliantly working with contractors outside IR35.”
'Out of the frying pan into the fire'
One such contractor, who left their previous client because it was indicating that it too would ban PSCs outright, is especially disappointed to now be at LLW (also known as LLW Repository -- LLWR).
“I’ve escaped one ban only to come here and face another. Out of the frying pan into the fire comes to mind.
“What’s worse is that the Nuclear Decommissioning Authority, which owns the sites LLWR operate, says that its policy is to adhere to the IR35 rules by assessing PSCs inside or outside. Well, that’s no longer happening.”
Another contractor source said: “I’m not at LLWR anymore. I’ve retired early thanks to IR35 [reform, because] despite what the NDA says, LLWR have blanketed all PSCs”.
'If you choose wisely'
Retiring over a single PSC ban seems a little drastic to accountant and ex-tax official Carolyn Walsh, who sounds sympathetic to the ‘wait it out’ advice issued last by Liquidators UK.
“If it’s clear that a contract should be paid under IR35, it’s not a bad idea to use an umbrella company if you choose wisely.
“But where contractors are caught by false blanket inside IR35 decisions,” she said, “an umbrella will be needed only for as long as it takes the storm to pass.”
'No later than January' for Deloitte contractors
Indicating that it is willing to weather the storm and assess status as the draft IR35 legislation stipulates, Deloitte has said in an internal memo to its contractors:
“Once the legislation is finalised, we will work with all related parties, including the organisation for which you contract, to determine which roles fall in and outside of IR35. The process for doing this will be the same, irrespective of the contracting agency.
“Once your individual status has been determined, you will be contacted promptly with details of next steps - the expectation is that this will be no later than January.”
Hearing from end-client line mangers – and agencies – what the ‘next steps’ could be was flagged up by contractors as important, in a Harvey Nash survey last month.
Some precise questions that contractors should be asking their agency now about contracting post-April are being prepared by the recruitment giant, exclusively for ContractorUK.
In the meantime, Tom Wallace, head of tax at WTT Consulting had a few of his own yesterday for a contractor on LinkedIn, who was wondering about rate rises and entitlements like holiday pay if he did join the payroll.
“Are you being paid a higher rate to forego the benefits you describe? Or are you being paid the higher rate to provide those benefits for yourself?” Mr Wallace asked, advising:
“If people want to make contracting a career, then they need to take a long term view of such things as life insurance, critical illness cover and the like.”
'More than a job; contracting is a lifestyle'
In a related online post, one limited company contractor implied he is already taking such an approach.
“Contracting is more than a type of job. It is a lifestyle for most of us and an opportunity to explore and learn from different businesses and environments.,” he said.
“It also provides us with necessary flexibility [like] time off work when we need it. And it releases us from the burden of annual appraisals, performance-related bonuses and the like.
“But it does come at a price. [Indeed, even if we are deemed employed for tax purposes under April’s IR35 reform] we’ll still have no paid holidays, no sick pay and no other entitlements from the government [which employees receive].”
The public policy team at Low Level Waste did not respond to a request for comment, nor did two spokespeople for JP Morgan.
A spokeswoman for Santander said: “As a result of changes being implemented to the off payroll working rules in the private sector, we are reviewing how we engage contractors to ensure that we will comply with the IR35 legal and regulatory requirements which will come into force from 6th April 2020.”