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The email goes on to specify that ‘Barclays will engage contractors on a PAYE basis only for new or renewed contracts’ and they will not be extending any existing contracts from now and will only offer PAYE contracts as of January 1 2020.
Others in the financial sector have already adopted similar cautionary approaches including HSBC, Morgan Stanley, and M&G Investments, and there are reports that the same blanket decision is set to be applied to contractors within pharma group, GlaxoSmithKline.
Blanket determinations
A GSK contractor approached contractor tax specialists, Larsen Howie, with news that GSK are going the same way as Barclaycard with renewals cut off after March 31, 2020.
This comes after the mass HMRC IR35 'nudge' letters sent out late August targeting approximately 1,500 GSK contractors. These letters asked contractors currently engaged by GSK to check their IR35 employment status and to subsequently prove that they’re genuinely self-employed. (See also: HMRC accuses 1,500 GSK contractors of IR35 offences - Aug 2019)
It would seem that GSK has made the ‘safe’ decision to push all of their current contractors to PAYE, thus putting themselves out of reach of IR35 - regardless of what the results of the letters are and with no apparent effort made to review each contractor’s case individually.
Barclays -‘short-sighted attitude’
Andy Vessey from Larsen Howie has spoken out before on why blanket decisions are not just bad for contractors, but why ruling out a flexible, specialised workforce is also a bad business move for the companies that use them.
Mr Vessey said: “This is a most short-sighted, disappointing, and lazy attitude to take. It is similar, however, to HSBC’s response to the IR35 reforms that were publicised a few months ago, and which were ultimately found to be half-truths. HSBC’s original communique was badly worded and one they had to retract.
“It may be that Barclays, similar to HSBC, will be outsourcing specific work/projects to Managed Service Providers (MSPs) - in which case, contractors would still be able to operate via their PSCs.
"All Barclays would be doing would be shifting the IR35 burden to either the MSP, if it falls within the definition of a medium-large sized company, or the contractor themselves as is the case right now.”
GSK - group action
In replying to the GSK contractor, for whom Larsen Howie has written a response to HMRC’s IR35 enquiry letter, Andy Vessey takes a closer look at GSK’s reported blanket off-payroll approach.
He wrote: "I think, in the first instance, you need to ascertain if GSK is going to insist that MSPs only engage contractors on a PAYE basis.
"However, I can’t see that they have authority to do this as they are simply absolving themselves of their responsibilities.
"If GSK is going to force contractors on to the books in one way or another then contractors will need to form themselves into action groups to resist this, with the threat of withdrawing their skills and expertise if they refuse to listen.
"There is strength in numbers and unity. Maximum publicity should be given to GSK’s negative approach."
No longer using contractors
HMRC still blind to impact of IR35 on the private sector
As has been predicted for some time by those campaigning against the IR35 clampdown in the private sector, medium to large companies are deciding to simply stop using limited company contractors.
Larsen Howie said that this could be due to the ambiguity of IR35 and the associated risks of a wrong employment status determination, or it could be down to laziness when it comes to reviewing each contractor’s contract and working practices individually.
Either way, these predictions continue to go unheeded by HMRC. While blanket IR35 decisions, including pushing all contractors to PAYE, are certainly the most direct and risk-averse route to removing any IR35 concerns, it’s been criticised by many as a short-sighted business move.
HSBC’s decision – who was arguably the first to opt for an unabashed blanket approach – was aptly described as ‘using a sledgehammer to crack a nut’. This kneejerk reaction to the impending IR35 reform appears to be spreading across the private sector, despite the pros of using contractors as part of a larger workforce still far outweighing the cons.
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2019
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