If you are working as a contractor, you probably haven’t escaped the news that Barclays and HSBC are no longer prepared to engage with contractors following the IR35 changes set for the private sector in April 2020. This includes contractors who provide their services through a limited company, personal services company or intermediary. Neither Barclays nor HSBC are said to be considering extending existing contracts and PAYE contracts only will be offered from January 1st, 2020.

Poor Contractor Attitude

In some respects, the attitude from the high street banks is hardly surprising. These are the same banks who dont recognise contracting as a special employment type that merits bespoke financial products such as mortgages. Challenger banks like Clydesdale and established ones like Halix and RBS have developed a reputation for having contractor friendly products. HSBC and Barclays have always regarded contractors as under self employed category and offered them relatively low lending. This kind of blanket response is short-sighted. It saves them the effort of trying to ensure their contractors are ‘outside IR35’, but meanwhile they could find their projects suffering. In much the same way as Thomas Cook failed to keep up with changing demands, these banks seem to be taking a similar risk-averse approach. They say “if you dont risk anything, you risk everything”

Importance of Contractors

There should never be any underestimation of contractors. Contractors can get products and services to markets quicker and they can cover skills gaps when required. This seemingly abrupt response means that organisations such as Barclays and HSBC will no longer have the cover they need to deal with these projects. With projects showing as “red” on their dashboards, it will be interesting to see how they react to those demands. Organisations using contractors will be able to staff key projects quickly and execute them quicker. They will always be right sized in terms of skills. Over the medium term, you can expect that organisations that find a way to navigate IR35 legislation will have a significant competitive advantage over their peers and outpace them.

Preparing for IR35

Instead of rushing to end all your contractors, there is time to put some thought into your processes, so that you comply with IR35 regulations. The first step is to assess your contractors to determine their IR35 status. You can do this by determining their roles and responsibilities. In order to ensure contractors are ‘outside IR35’, it must be clear to HMRC that they are working for you in their own right and are not ‘acting’ as an employee. One significant way to ensure your contractors are recognised as ‘outside IR35’ is by allowing the contractors to be substituted.

Are you an organisation looking for advice on IR35? Contact us today and we can arrange a free consultation. If you are a contractor, take a look at our guide to retaining your outside IR35 status.