Experts reveal that a “domino effect” has emerged in the contractor industry. Large businesses are hesitant to work with limited company contractors.
Prominent names like M&G Investments, Morgan Stanley, HSBC, Barclays, and Lloyds have suggested that they would refuse to engage limited company contractors.
At HSBC, contractors held meetings with HR in a bid to prove that they did not fall in the scope of IR35. However, they were dismayed when they were let go with immediate effect.
According to an inside source from HSBC, no clear policy was communicated to the contractors. It was established that renewal was possible via a consultancy, but not with a PSC.
Carolyn Walsh, a tax adviser, who is known to test an HSBC contractor to be falling outside of the IR35, detected an air of contagion going by the patterns client are reacting in this scenario. Thus, she has referred this as a “domino effect”. The former tax inspector has blamed the lack of trust in the CEST as the root cause of the current frenzy, which is not trusted even when it evaluates a contractor to be falling outside of the IR35.
He also singled out other factors like how HMRC is going against PSCs, which is making clients withdraw from these rules. To do this, they are going PAYE-only.
A few days ago, HRC Recruitment alerted that blanket rulings for ‘inside IR35’ were swelling up against PSCs. This increase was experienced after the April reforms and constituted of the biggest engagers.
Dean Durrant from the firm stated that the largest users of contractors like Lloyds, Barclays, and GSK, now view the reform as a ‘single risk that needs to be mitigated.’
Barclays issued memos to the line managers of its contractors which made it clear that going by the April 2020 rules, the liability of collecting the NICs and income tax will be the responsibility of the end user. It further stated:
“In light of these changes, Barclays has reviewed its third-party resourcing arrangements and has decided that it will no longer engage contractors who provide their services via a personal services company, limited company or other intermediary.”
Harvey Nash’s Colin Morley thinks that this announcement has created more questions. He inquired whether Barclays is going to make the contractors choose the PAYE route or utilise umbrella companies.