IR35 reform: HSBC bans its consultancies from supplying limited company contractors

HSBC has taken the unprecedented step of banning its entire consultancy network from using limited company contractors, ContractorUK has learnt.

The bank says that all contractors who want to avoid being jobless must be on a PAYE or umbrella contract, whether direct with HSBC or indirectly via one of its third-party providers.

In force now given that it was announced with immediate effect, HSBC’s ban comes with no rate uplift to convert to on-payroll, and no renewal for the consultancy-PSCs who do not convert.  


These terms seem to explain why one tax adviser yesterday described the ban as “way beyond what is reasonable.”

But another contractor tax expert, James Poyser, went further saying the ban is nothing short of “chilling.”

His characterisation of the ban, which appears to be HSBC’s latest attempt to duck new IR35 rules from April, stems from HSBC being a trend-setter in this area.

In fact, HSBC was the first commercial engager to ban PSCs in a bid to bypass the incoming rules – a move that triggered dozens of other engagers in numerous sectors to do the same.

Now, the fear is that just as HSBC’s own PSC ban was copied by banks, telcos and pharmas, its ban on PSCs from its consultancies, which include Capgemini and Infosys, will be copied too.


“If HSBC and others follow suit and take this approach then I fear that the consequences will be disastrous [for many PSC contractors],” warns ex-tax officer Kate Cottrell, an expert on IR35.

“And it will be disastrous for all the large consultancies, many of which are busy delivering extremely important projects across government departments, including, ironically, HMRC.”

As to why HSBC has stopped its consultancies supplying it with PSCs, the former tax inspector said it could be a reaction to a move which the Revenue made a few months ago, on the quiet:

HMRC guidance for the public sector on ‘genuine outsourced services’, which stated such services were unaffected by the reform, [has] simply disappeared from HMRC’s site.

“No explanation for the removal was given, and we [still don’t have] the final legislation. By simply removing it, does it mean that the final legislation will not include this exemption?”

'Tail wagging the dog'

Bowers Partnership believes there is another reason why HSBC’s consultancy-provided PSCs must now become HSBC staff or, “much more likely”, umbrella company contractors.

“This ban by HSBC on its Consultancy Associates model appears to be a case of the tail wagging the dog,” the niche recruitment agency said in a statement last night.

“The bank has an RPO on-site and because the RPO wants to limit its own exposure to IR35 reform, while maximising margins, it’s no wonder consultancy-provided PSCs are out.”

'HSBC overreaching'

Regardless of HSBC’s motivation, which a PSC said is actually the bank’s unwillingness to expose itself to “any” risk whatsoever, Mr Poyser said the affected individauls have his sympathy.  

“It's hard enough for contractors at HSBC who've been impacted by their policy banning PSCs, but HSBC now appears to be overreaching in their execution of April's [reform].”

The inniAccounts CEO added: “The Treasury needs to act promptly and delay the disastrous rollout….before this ripples out of control and paralyses the entire contingent workforce.

“As a nation, we've got a busy year of change ahead with Brexit, and delivering change is what contractors and consultants do best. Let's not shoot ourselves in the foot at such a critical time”.

'Blanket insistence'

For one of HSBC’s consultancy partner-contractors, who’s resisting closing down his limited company in spite of the new ban, the shot has already been fired.

“There’s a blanket insistence by HSBC that there will be no renewals for those [of us limited company contractors here via consultancies who] refuse the brolly option.”  

Signalling that ‘money talks,’ he added: “I’ll go through the motions of a renewal [via an umbrella company], but am actively looking for another, better-paid opportunity elsewhere.

“One’s already on the cards and although it’s inside IR35…it offers a significant rate uplift…[whereas at HSBC pushing for] an uplift…results in immediate rejection of renewal.”

'Calling the shots'

Bowers Partnership confirmed: “The thousands of PSCs hit by this ban won’t want to know this, but at both HSBC and its RPO there’s many calling the shots who will feel quite pleased.

“They’ll be pleased to have yesterday’s high-rate consultants as PSCs come back tomorrow as less expensive brolly contractors, assuming they still want to stay with HSBC that is.”

A spokesperson for HSBC did not address whether the ‘no rate uplift’ policy for consultancy-provided PSCs, who agree to stay on by becoming umbrella users, has exceptions.

The bank also provided no word on what assessment, if any, the corporation has made about the impact of the consultancy PSC ban on HSBC’s projects.

'Short-sighted foolishness'

The HSBC spokesperson would only say: “Like many large companies, HSBC is continuing to prepare for the changes to IR35 legislation in April 2020

“As part of this ongoing review, we continue to work with our suppliers to ensure they and HSBC are compliant with the incoming rules.”

Addressing HSBC, a contractor reflected: “Good luck to them then I say. I think they will need it. I hope the perms who remain up their work effort, as they will need to plug the gap [in light of HSBC’s previous] announcement to shed staff. A fun place to be.”

Angela Ferguson, head of employment taxes at Saffery Champness, which met with HMRC this week as part of the IR35 reform review, told ContractorUK: “Any ban [like this] is short-sighted foolishness. Trying to divert the risk is not taking ‘reasonable care’ for the many genuine outside IR35 consultants.”

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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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