Yesterday an email went out to Barclays line managers stating that, as a direct consequence of the private sector IR35 changes set for April 2020, they ‘will no longer engage contractors who provide their services via a personal services company, limited company, or other intermediary.’
It goes on to specify that ‘Barclays will engage contractors on a PAYE basis only for new or renewed contracts.’ Barclays will not extend any existing contracts after October 1st 2019 and will only offer PAYE contracts as of January 1st 2020.
While this news has sadly stopped being a surprise when it comes to the financial sector following similar approaches to the off-payroll rules by HSBC, Morgan Stanley, and M&G Investments, we’ve also been informed that the same blanket decision is set to be applied to GSK contractors.
Barclays contractors face IR35 blanket determinations - could it be the same for GSK?
A GSK contractor, who wishes to remain anonymous, came forward in an email this morning. Speaking to our Head of Tax, ex-Qdos IR35 specialist Andy Vessey ATT, he writes:
‘Andy, I suspect you will have seen this letter at Barclaycard. Indications are that GSK will be going the exact same way.’
‘The industry needs a big response to avoid being employees,’ they continue. ‘No review of individual contracts.’ We've asked the contractor for further comments.
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 pharma group GlaxoSmithKline to check their IR35 employment status and to subsequently prove that they’re genuinely self-employed.
Should GSK make 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 and GSK should not have ‘short-sighted attitude’ to IR35
Vessey 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.
Commenting on Barclays’ push to PAYE contracts only, he says:
“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,” he continues. “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 contractors affected by IR35 advised to take group action
In replying to the GSK contractor, Andy Vessey takes a closer look at GSK’s reported blanket off-payroll approach.
‘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,’ he writes. ‘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,’ Vessey further advises. ‘There is strength in numbers and unity. Maximum publicity should be given to GSK’s negative approach.’
HMRC still blind to impact of IR35 on the private sector
As predicted by those campaigning against the legislation, and previous Larsen Howie articles, medium to large companies are deciding to simply stop using limited company contractors. 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.
IR35 advice for contractors
Should you want some peace of mind, we offer a full contract review amongst other services to help you prepare for IR35. We’ll give a pass or fail based on the current contract you hold, along with comprehensive comments on how to improve any problem areas. Additionally, we offer IR35 investigation representation from our Head of Tax and resident IR35 expert Andy Vessey ATT should it go to tribunal.
In light of HMRC's targeting of GSK contractors, we’ve also been offering reduced hourly consultancy fees to make the best advice and defence more accessible to those affected. Find out more about what we can offer you on our dedicated GSK contractors page here.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.