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

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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.

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7 Comments - Write a Comment

  1. Sounds like knee jerk reaction based on poor advice and/or little research. And probably taking a highly risk averse “One size fits all” approach. The Civil Service has been dealing with this mess for circa 3yrs now and it is manageable if stakeholders are suitably informed and apply some common sense…..the old adage of “rules are for the obedience of fools and the guidance of the wise” might apply somewhat….

  2. How will Ernst & Young, PWC and KMPG survive if their customers take this approach? Or will they be deemed as “ok to use”? Clearly and utterly baffled at this legislation…..

  3. It’s highly likely the use of consultancy support (statements of work based engagements etc etc) will boom as an easier (more costly?) way to reduce IR35 risks. And as we know, consulting firms often end up fishing in the same candidate pools for their Associates as interim/contractor supply agencies .

  4. Sounds a good idea to me – limit opportunities for “tax -efficient” contractors – get them on the books on short fixed term contracts as necessary and let them pay their tax like the rest of us.
    As the market for lucrative consultancy decreases in this way, people will have more limited opportunities to contract and will have to take work on a proper footing – or risk not having an income at all.
    What’s not to like ?
    All this sycophantic creeping around “talent” and it being imperative to do nothing to upset them, even a little, really has to stop.
    I can see by the comments already posted that they are running scared. Good.

  5. I agree with SIR above the original intention for flexible workers has lost its way completely and we now have a two tiered ‘workforce’ doing similar work in a similar way – one group contributes significantly more to the public services that both groups enjoy – its about time that the legislation reverted us back to the original intention of using flex workers and stopped enabling people to pretend to want a work flexibly when the truth is their real intention is to avoid paying the same in taxes.

  6. This only acts to squeeze independent contractors to the benefit of Wipro, Tata Consulting, Accenture, KPMG etc.

  7. I totally agree with their decision, they are damaging legislation. PAYE is the best option for them.

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