Following the 2020 private sector IR35 changes, the responsibility for determining a contractor’s employment status will lie with the end client instead of the contractor. If they consider the duties to be similar to an employee, the agency must pay Employers NI and the apprenticeship levy. This will need to be over and above the agreed rate, unless the contract is renegotiated before the legislation comes in to force. This can add up over time, especially for larger companies that have many contractors.
The IR35 changes resulted in an announcement from Barclays outlining that they will no longer employ anyone contracting as a sole trader or a limited company. UK line managers were instructed (as of the 1st of October) to only employ contractors on a PAYE basis. Barclays contractors who are paid through agencies or via the bank’s procurement teams mustn’t have their contracts extended further than February 2020, and that new contractors hired from January 2020 must be PAYE.
Royal Bank of Scotland has also made a similar announcement. Internal communications stated that all existing contractors working as limited companies must now change to either PAYE or an umbrella company by February 2020.
Barclays and Royal Bank of Scotland won’t be the only banks making these changes. HSBC and Morgan Stanley have already stated that similarly, they will only employ contractors who are employed by consulting firms, or as PAYE staff.
These changes are a direct consequence of the private sector IR35 changes. If you’d like to find out more, we have a some blog posts around the topic:
To make sure you can still obtain your desired contracts, using an Umbrella Company may be the best option. It is important however, to do your research. There are many operators that claim to provide umbrella solutions but are operating tax-aggressive options that are open to challenge from HMRC. If it sounds too good to be true, it is likely that it is.
Exceed Outsourcing is HMRC compliant and Professional Passport accredited, giving you complete peace of mind. Please call us to see how we could help you: 0800 612 8787.