Barclays to no longer use contractors is 'a taste of the IR35 chaos to come'

Barclays Bank has announced it will stop using off-payroll contractors through limited companies, which has been described as “a taste of the IR35 chaos to come”.

The Association of Independent Professionals and the Self-Employed (IPSE) believes this is a sign of the damages the legislation will bring with it. Barclays will be shifting all of its contractors onto the Pay As You Earn (PAYE) system.

The motive behind this move is to circumvent the IR35 regulations which will come in to effect in the private sector in April 2020.

Barclays sent out a letter to its contractors explaining how they did not wish to be liable for employment status and so has decided “it will no longer engage contractors who provide their services via a personal services company, limited company or other intermediaries.”  The bank will not be extending the contracts of anyone working off-payroll.

Andy Chamberlain, IPSE deputy director of policy, said:

For a long time, we at IPSE have warned the changes to IR35 will have damaging consequences for business.

Decisions like this are harmful not just to the self-employed, but also to companies themselves, as they lose out on the vital flexibility and financial boost that ‘outside IR35’ contractors provide.

We urge other businesses not to take this short-sighted and dangerous step, and urgently call on the government to halt and reconsider the changes to IR35.

IR35 is a nightmarishly complex piece of legislation – so complex that Barclays has decided it cannot manage the risk of falling foul of it. The approach from Barclays makes a mockery of the government’s claim that the genuinely self-employed won’t be affected by the April 2020 rules.

Others have questioned this decision by the bank, saying that by doing this they will lose out on advantages contractors bring such as flexibility.

Matt Fryer, group compliance director, Brookson Legal, the only regulated law firm which focuses on IR35 said:

By taking this knee-jerk approach and only working with contractors under PAYE, Barclays may limit its flexible talent pool.

We recently spoke to over 500 skilled contractors and 37 per cent told us they would never consider working under PAYE, while 59 per cent would consider moving to another company that does advertise roles outside of IR35. 50 per cent would only move only move under PAYE if it was ‘made their while’, which raises the question of whether firms will increase net pay or offer employee benefits.

Businesses which intend to offer their contractors permanent positions, with benefits, will find that they lose the advantages and agility of a flexible workforce.

Seb Maley, CEO of Qdos, an insurance and tax advice for the self-employed said:

If the bank is to go ahead with this, they will lose out on the flexibility and savings achieved when compliantly engaging contractors outside IR35 – something that we expect most private sector firms to continue enjoying when the changes arrive.