Back in July, we wrote on the possibility of the Royal Bank of Scotland being one of the few banks to make a stand against IR35 in the contractors’ favour. Unfortunately, the bank has about-turned on that pledge; as reported by Contractor UK, an internal memo sent earlier this month specified that all existing limited company contractors must move to either an umbrella company or PAYE by February 28th.

While RBS contractors only heard about this push to PAYE or umbrella company recently, it's been surmised that this approach to the private sector IR35 reform could've been put into motion as early as 8th August this year. Instead of the common 3-or-6-month contract renewals, contracts have only been on offer until the end of February 2020 - taking them neatly up to the line in the sand.

Simon Moore of Contactor UK writes:

'A month before, in July, RBS was rumoured to be exploring how to retain its PSCs and despite an RBS spokesman then denying such a policy, he said RBS would still use PSCs. The one caveat he then inserted was that such a stance by RBS depended on the small print of the then-incoming draft IR35 legislation. That caveat now seems to have been acted upon.'

RBS joins ranks of lazy banks taking blanket approach to IR35

Andy Vessey, Head of Tax at Larsen Howie and ex-Qdos IR35 specialist, doesn’t condone this all-too-common approach to IR35.

“It is the end client’s decision on what basis they wish to engage their contingent workforce. That is their prerogative,” he says. “However, this policy is utterly short-sighted and lazy, and will only serve to drive talent into the arms of competitors who, are at least, willing to engage self-employed contractors even if via an outsourced supplier.”

“I can understand large business wanting to mitigate their tax risk but why it has never occurred to RBS to go down the outsourced supplier route leaves one scratching their head,” he continues. “That is, unless, they have and decided that they just cannot relinquish any control whatsoever over all aspects of their work that require contingent labour.”

“I’d be interested to learn if RBS is planning to increase contracting rates to compensate them, albeit via an agency or Umbrella, for railroading them down a PAYE path. If not, then why would any current or prospective contractor want to work for them, unless work is scarce and their options are limited?”

“HMRC will, no doubt, be rubbing their hands because, just like the MSC legislation, the stroke of the legislator's pen is warding off engagers & swelling the Treasury coffers unnecessarily.”

Did RBS always plan to go back on IR35 pledge?

As stated previously, RBS could've been planning its push to PAYE or umbrella company as far back as summer this year; Larsen Howie had a contractor, who wishes to remain anonymous, come forward with this hypothesis. He also shared an IR35 Communication Update they received in August which reads:

'Over the coming months the IR35 working party at RBS will be working closely with the business to finalise the Bank’s approach to IR35 and once that’s complete we’ll be back in touch to cover the approach to assignment extensions, requirements for new workers and the approach to existing contractors before the legislation comes into effect.'

“For many months, all contract extensions have only been to the end of February 2020 or earlier,” the contractor said on the subject. “My own was renewed to that end date, which is most unusual - by convention, renewals are usually 3, 6 or 12 months at a time. I can’t prove this, but suspect the bank had more or less decided their chosen course of action all along.”

“They are, of course, quite risk-averse, post the financial crash,” he continues. “They are also hidebound, process-driven, and over-managed, so it’s no real surprise this has happened.”

How are RBS – and all financial sector contractors – being affected by the blanket IR35 approach?

The same contractor, who’s worked across the financial sector and has been at the coalface of IR35 and its repercussions, also commented on how contractors in the private sector are being affected.

“It’s my impression that there is a higher concentration of contractors, and reliance on them, at RBS than at other banks,” he says. “However my gut feeling is that all but the very top cream will take this on the chin and carry on working, under the new arrangements.”

“For one reason, the local job market may not have many alternatives,” he continues. “For another, some of the ageing technologies in use by banks don’t have much of a market outside the financial sector. Most important of all, if you’re trying to feed a family and pay a mortgage, you’re pretty much stuck. They’ll look around for alternative opportunities, certainly, but they won’t cut their noses off to spite their faces.”

Be proactive and prepare for IR35

Larsen Howie has made it clear that the way banks are approaching IR35 is not advisable, and that medium-to-large companies would greatly benefit from being proactive about the reform. We want to help contractors as much as possible in these challenging times – if you have any comments or stories you wish to share with us, please get in touch.

Should you want some peace of mind, whether you’re a contractor, recruiter, or end-client, 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 held, 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.

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.

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