Tesco Bank Contractor Survival Guide: what to do if ‘inside IR35’ looms

It’s clear that contractors’ advisers have different assessments about Tesco Bank’s announcement that all limited company workers who work with it after March 2020 will be decided inside IR35. What’s less clear is what advice or guidance contractors should follow.

Before we explore that however, from a large business perspective, the approach being taken by Tesco Bank (TB) can be seen as reasonable, writes Kate Cottrell, co-founder of IR35 advisory Bauer & Cottrell.

This bank, and a few others it seems, are simply not going to take the risk of falling foul of HMRC when it comes to the new IR35 legislation from April 2020. 

Why is it mainly the banks being anti-PSC?

The banking industry has many other rules and regulations impacting it, such as the Banking Code, the FCA rules and the Criminal Finances Act. So banks, as an end-user of PSC contractors, have a lot more hoops to jump through than many others, in many other industries, to prove they are compliant.

Next, consider that it is well-known to all that the banking industry uses a lot of contractors. Some in business-as-usual roles and others in specific projects. Due to the big numbers of contractors involved, it is not surprising that some banks are choosing to use the incoming off-payroll rules as part of a wholesale policy-change towards engaging limited company contractors.  

Few and far between...

In the meantime, although the final and universal policy for Tesco Bank PSCs is not yet available, this bank is clearly taking a harsher stance than others. Even with director-level approval for a post March extension, you will still be inside IR35. It is not really clear if there are even any other options other than ‘limited company inside IR35.’ But contractors crudely forming consultancies just to bypass the rules won’t be one of them, as such action will not be permitted by Tesco Bank or HMRC.   

What should current Tesco Bank contractors do now?

There is clearly a retrospective risk with HMRC claiming that you were always inside IR35, where your role is to be deemed IR35-caught but where you were not operating IR35 previously. On receipt of any HMRC communication outlining this, limited company contractors should strongly consider taking the following five actions:

1. Check with your accountant the numbers

How much will you earn inside IR35 with no relief for travel expenses post-April 2020?  Can you live on it, and are you prepared to do so?

2. Explore what your current contract states regarding Termination 

Remember if you need to exit, this should be considered in relation to invoicing timescales.  You probably need to create your last invoice in January or February 2020 to ensure payment (gross) before 6th April 2020.

3. Confirm your IR35 status

Now is the time to properly evaluate your current IR35 position.  Get a formal review and if outside IR35, collect all the available evidence to prove this to protect yourself against subsequent HMRC investigations.

4. Read the small print

If you have any sort of IR35 insurance in place, check with your insurance provider that you will still be covered if you have received a HMRC communication like this.  Does the HMRC communication amount to a change of circumstances which would invalidate the policy?

5. Broach

Raise all your issues with the end-client and with your agency – now is the time to have these conversations.

Final thought

Lastly, don’t panic. It may be that we will see these banking sector IR35 policies evolve, just like we saw with the public sector off-payroll rules at taxpayer-funded bodies. Many had to change their policies to ensure that they could engage with contractors outside IR35 to attract the skills and talent they need. In the meantime all can take some action, if only to properly understand all the implications of what appears to be happening now.

Monday 14th Oct 2019
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Written by Kate Cottrell

Kate Cottrell from Bauer & Cottrell Limited - leading UK IR35 expert who has been contributing IR35 guidance, commentary and articles to ContractorUK for many years.
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