The Royal Bank of Scotland (RBS) has become the latest large bank to place a ban on the use of contractors which means, now all “big four banks” in the UK have reacted to the run up to IR35 in the same way.
In July 2019, RBS implied it would be standing by contractors despite IR35, however the bank has now reversed this message.
RBS told all “its existing contractors” who work as limited companies they must either transfer to the Pay As You Earn (PAYE) system of paying income tax or umbrella companies by February 28th 2020.
HSBC was the first out of the “four big banks” to put a stop to contractors in May, followed by Barclays in October, Lloyds a week later and now RBS.
Matt Fryer, group compliance director, Brookson Legal, the only regulated law firm which focuses on IR35 said:
We’re continuing to see a domino effect with large financial institutions who have decided that a blanket approach to IR35 is the easiest way to ensure compliance post April 2020. This echoes our own business research, which found that 71 per cent of UK finance firms are considering taking a blanket approach to their IR35 assessments. Firms should ask themselves, however, whether this approach is sustainable when it comes to attracting and retaining talent.
While it may seem like an easy solution in the short term, it removes access to a skilled contractor workforce that wishes to remain flexible. This may damage businesses ability to scale resource up and down at short notice. Businesses that take the necessary steps to continue working with contractors who do not want to work within IR35, on the other hand, may find they can scoop up some of the best talent and gain a competitive advantage from their expertise.
On the 23rd October, HM Revenue and Customs (HMRC) came under fire for publishing a briefing note on IR35 that offered “little comfort to concerned self-employed people” according to the Association of Independent Professionals and the Self Employed (IPSE).