Blanket Ban Companies Making IR35 Mistake
Those blanket ban companies who are forcing contractors to give up their personal service companies due to the new Conservative Government’s IR35 reforms may be making a huge mistake.
The big UK banks are taking a massive gamble that their contractors won’t quit after the massive hike in tax that the banks are forcing on them even if they are really outside IR35.
HMRC, Boris Johnson and Chancellor Sajid Javid are hoping that supine contractors will surrender meekly and either take permanent jobs, join umbrella companies or go PAYE via their agencies.
Bank after bank (you’d almost think they were operating like a cartel) announced this blanket ban on hiring personal service company contractors.
Contractor Questions on IR35 Blanket Ban Companies
- Will companies who operate IR35 blanket bans succeed?
- Will the Demand for Contractors Be Greater than the Supply of Them?
- Are Companies Intending to Hire More or Fewer Contractors After IR35 Reforms?
- Who Will Have the Whip Hand in Coming Years – Contractors or Companies?
- What Are Contractors Planning to Do at IR35 Blanket Ban Companies?
- Will There Still be Premium Rates for Contractors in the Banking Sector?
- Will Contractors in the Banking Sector Stay or Go Elsewhere?
- Why are the Conservative Government Interfering in the Flexible Worker Market?
- Will Contractors in Blanket Ban Companies Dump Them En Masse?
Will companies who operate IR35 blanket bans succeed
Well, this IR35 blanket ban policy gamble may be about to become massively unstuck.
Why do I say that?
It’s the market.
It’s all down to the Economic Laws of Supply and Demand.
Will the Demand for Contractors Be Greater than the Supply of Them
This is a stunt that the banks and other companies could have pulled off 10 years ago in the middle of a massive downturn in the contractor market.
This would only work if the Supply of contractors is above the Demand for them. Then the companies, like the major UK banks, could impose themselves on contractors.
The market for contractors is already rising.
But there is even better news for contractors.
Are Companies Intending to Hire More or Fewer Contractors After IR35 Reforms
According to a recent survey of companies hiring intentions by Robert Half almost five times as many companies will be hiring more contractors compared to the number of companies who plan to hire fewer contractors.
59% of the companies said that they expected the demand for contractors to stay the same after the IR35 changes.
However, 33% of companies surveyed expected demand for contractors to rise after the IR35 changes. Only 7% of companies expected demand for contractors to go down.
So, what does this mean?
Who Will Have the Whip Hand in Coming Years – Contractors or Companies
This means that, according to the laws of Supply and Demand that the contractors have the whip hand. In the next year or so Demand is going to rise by more than the Supply of Contractors.
That means that the big UK banks and other companies issuing blanket bans on personal service company contractors will find it very difficult to hang on to their contractors. In a booming market, which it will be, contractors will have a choice.
What Are Contractors Planning to Do at IR35 Blanket Ban Companies
Already older bank contractors are talking about retiring early. Some have already decided to go abroad to work, one guy telling me he has a European job which he can do remotely from home.
Other contractors are taking permanent jobs – but with other companies.
Contractors at the big banks and other blanket ban companies are being given three options:-
- Take a permanent job
- Go PAYE via an umbrella company or via their agencies
- Leave
The banks were banking on most contractors meekly accepting their fate and going for Option 2.
However, an increasing number of contractors are deciding that they will take Option 3 – Leave. They are not telling the banks yet as they search for contract jobs in a rising market.
Will There Still be Premium Rates for Contractors in the Banking Sector
There was always a premium on contract rates in the banking sector. That mean that they got much of the best contractor talent.
That premium has been eroded in one fell swoop. If contractors who are really outside IR35 but are being forced to be taxed as if they are inside IR35, look at their change in income after tax, many will decide that contracting at other companies in sectors not issuing blanket bans is now more lucrative.
Will Contractors in the Banking Sector Stay or Go Elsewhere
There will be a massive exodus from the UK’s major banks of some of the country’s best IT talent. They will take with them not only their expertise but their knowledge of the banks’ business and computer systems.
This is just at the time when the banks most need them. They have regulatory systems that they must complete in time. There will be the Brexit changes too.
Suddenly under threat is the LIBOR Decommissioning Projects at the major banks. This is in an area where trillions of pounds are at stake. Some banks are now assessing possible delays in this area and their impact.
Why are the Conservative Government Interfering in the Flexible Worker Market
And yet the Conservative Government are prepared to gamble with profitability of hundreds and hundreds of UK companies just to bring in a measly £3bn in 4 years. That’s a sum worth less than a tenth of a penny in the pound on income tax.
This is absolutely crazy. The lunatics are now running the Asylum.
Sajid Javid knows that IR35is crazy as he said so a few years ago Repeal Silly IR35 Tax on Contractors Says Sajid Javid
Will Contractors in Blanket Ban Companies Dump Them En Masse
But contractors heavily demotivated already by the sudden 20% drop in income, will now be making their exit plans en masse. And that will cause a much greater hit to the UK economy than the less than a billion a year that the IR35 reforms bring in.
Someone should do a proper Cost / Benefit Analysis as it is currently only the Benefit side that is being counted by Boris, Sajid and HMRC.
Happy New Year contractors. The worms are turning slowly but surely.
The big banks and other UK companies can no longer control the market as they are attempting to do now.
Lib Dems to Abolish Loan Charge and Review IR35 Reforms
Conservative Party IR35 Policy – Contractors Face Tory Wipeout
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