Major brands shut shop on limited company contractors, and not just for Christmas

Long-established brands are joining the dozen large and mid-sized firms banning limited company workers outright, to save themselves from having to abide 2020’s new IR35 rules.

GlaxoSmithKline is among them, formally announcing the ‘cease and desist’ stance on ‘Ltd’ contractors which ContractorUK revealed the pharma had all but approved back in October.

It means GSK contractors now have until only January 31st – less than 45 days -- to inform the company which one of the narrow options imposed on them they want to select.

“Move to a PAYE contract and remain working with GSK, or….terminate your existing contract,” states an internal GSK memo, sent to PSC contractors on December 11th.

Wells Fargo (WF) has given its contractors a similar ultimatum, albeit with a later cut-off than GSK’s (March), because the bank says no extensions will be granted post-February.

“Your existing contract as a PSC/Limited Company will not be extended beyond February”, a WF memo states. “Your recruitment agency will contact you to discuss alternative terms.”

'Confusing, bizarre'

Confusingly, the bank also outlines on the memo its Status Determination Statement policy and IR35 Appeals Process, both of which would only be required if PSCs got to stay on.

Adding to the confusion (or Wells Fargo’s ‘lack of understanding’ according to one affected PSC), the memo goes on to say that all PSCs are “considered inside the [IR35] legislation.”   

“Bizarrely, [the bank gives] a blanket ‘inside IR35’ determination,” the PSC says. “It’s moot as [they’re] not allowing PSCs [anyway]. It’s like they don’t fully understand the legislation.”

Another unusual take on the draft IR35 legislation is being seen at Standard Life Aberdeen, where PSCs are being reminded that they can quit if the SDS isn’t to their liking.

'If PSCs don't accept...'

In fact, while an appeals process for PSCs who disagree about their IR35 status is outlined by the investment company, they are first informed of two reasons why they may wish to leave.

The first is that the decision by Standard Life Aberdeen could be something PSCs would rather not receive at all, so they can choose to have their contract brought to an early end.

The second is that PSCs might not “accept” the decision in the SDS, hence the invitation for them to leave. Only afterwards, lower down the memo, are PSCs told they can appeal.

But even PSCs who fight won’t likely stay at Standard Life Aberdeen for long, given that overturning its decision isn’t even explored in the memo’s ‘Appeals’ section, which says:  

“The above options will still hold at the end of the appeals process, with 28th February still being the cut-off if you do not wish to accept the determination and associated new contract.”

'There's little time left'

Similar cut-offs (after which PSCs will no longer be hired or operational) are also now in place at investment firm Aegon, and at some divisions of engineering giant Rolls-Royce.

As to why a big chunk of end-users have waited until the final fortnight of the working year to set their IR35 reform stance, experts believe that it is less malicious than it might appear.

“They are probably [doing this now] because there is little time left to give their contractors the warnings of these impending [and potentially adverse] changes,” says Re Legal Consulting.

A second status advisory Bauer & Cottrell, which today writes exclusively for ContractorUK agrees. “[Potentially] they [are] doing the decent thing.

“It could be that these firms are simply…making their positions [on IR35 reform] clear before Christmas.

“At least this way,” adds the advisory, “their contractors will know where they stand, and then may be able to address the serious shortfall in incomes.”

'Government silence on IR35 at odds with electioneering'

A recruiter preferred that government policy-making now winding down for the Christmas period is leaving end-users in little doubt that the reforms are going to apply from April 6th.

“In the absence of any firm direction from HMRC, or the government whose silence on IR35 is at odds with all their loud electioneering just a few weeks ago, these big clients now have to act.

“They are having to make the assumption that the draft will pass into law, and that they need to get organised now. [Most of those banning PSCs in the last couple of weeks] are simply too large and their contractor estates too huge [to wait any longer].”

And there are practical considerations too, added the recruiter who also said: “These sorts of decisions do need to be taken in January to allow time for notice to be given and contracts changed, new payment arrangements set up and the like. And therefore to have payments made in time for February.

“When you’ve got over a 1,000 contractors on-site….the sheer volume [of PSCs] make the chances of meeting the January decision timetable almost impossible if the engager really was to work through these on a one-by-one basis.”

'Corporate considerations'

According to LinkedIn posts, Sainsbury’s Bank and Argos Financial Services will reportedly adopt such individual IR35 status assessments, meaning they will shun both blanket bans and blanket ‘inside IR35’ rulings.

Of their respective policies, spokespeople for GSK and Wells Fargo have been asked to comment, as has a spokesman for Aegon who is preparing a statement. Meanwhile, a spokeswoman for Rolls-Royce responded:

“Due to UK government tax legislation changes to IR35 that come into force in April 2020 and wider corporate considerations, we have reviewed our current Contingent Worker Policy to ensure that it is compliant with the changed regulations.

“As a result of these changes, and in order to reduce risk and align with our simplified group operating model, Rolls-Royce will no longer engage with limited company workers for contingent labour.

"We are currently liaising with our contingent workers through their agencies to provide the support required to help them through this process.”

UPDATES:

A spokesman for Aegon said: “Like many businesses we currently engage with a number of contractors. As a consequence of the planned tax changes, we’ve reviewed our contractor sourcing policy and we’ll only engage contractors via an on-payroll basis. This approach will apply to both existing and renewed contracts. 

“Contracts with PSCs will no longer be renewed with effect from April 3rd 2020.”

A spokesman for GlaxoSmithKline (GSK): “To ensure we are compliant with the new IR35 legislation, we have decided to engage agency workers on a PAYE-only basis from 2020 onwards.

"GSK recognises the important contribution these workers make to the company. We are working with hiring managers and recruitment agencies to support our agency workers through this change.”

A spokeswoman for Wells Fargo said: "The ceasing of personal service company contracting by February 29th 2020, in reaction to IR35 legislation - which comes into force in April 2020 - Wells Fargo, in line with the financial services industry, will be changing its terms of engagement with contractors who operate via PSC.

"We have offered alternative arrangements whereby all PSC contingency resources can convert to PAYE or umbrella company status. Following the changes, this adjustment will support and help us retain valuable contingency team members within the evolving legislative environment.”

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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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