Contractors Using Limited Companies
HSBC gave announced that they will no longer hire contractors using limited companies. This will start from September 2019. This is because of the new IR35 rule changes that the Government will implement in April 2020. HSBC are doing this directly because of these IR35 rule changes in the private sector. They do not want to take the risk of potentially being fined and ask for contractors’ taxes if they get the IR35 assessments of contractors wrong. They now do not have to assess the IR35 status of contractors using HMRC’s online IR35 test (CEST).
Options for Contractors Using Limited Companies
They will give current contractors a 3-way ultimatum:-
- Become a permanent employee
- Leave the company
- Be employed by a third partly like an umbrella company or an agency.
Fee Payers Now Decide Contractors IR35 Status
HMRC have been very clever (or sly). It used to be that contractors decided their own IR35 status. If they got it wrong HMRC would come after them for back tax, interest and penalties. Over a six year period that could come to tens of thousands of pounds.
Now they have pushed the onus on deciding a contractor’s IR35 status onto the hiring company. If the hiring company get it wrong they may have to make up the back tax.
The onus is on what HMRC call the fee payer to decide IR35 status.
They already implemented this in the public sector in 2017.
Contractors Using Limited Companies Looking Elsewhere
It seems that many of HSBC’s contractors using limited companies are now looking for contracts elsewhere. If contractors wanted permanent jobs they would apply for them. Also, many contractors are lifestyle contractors. The money is good but many would be horrified by the ‘threat’ of being forced to become an employee and go back into the system.
It’s a real bonus for them that HSBC have effectively given them 4 months notice. That gives them plenty of opportunity to look for contracts elsewhere.
Few Contractors Using Limited Companies Will Take Permanent Jobs
The likelihood is that the best of HSBC’s contractors will easily find work elsewhere. If HSBC do manage to get any contractors to take permanent jobs it will be the ones who are struggling to get contracts elsewhere.
However, the worry is that, in the run-up to April 2020, when the new IR35 rules start in the private sector, more hiring companies will refuse to hire limited company using contractors.
Indeed it could spell the end of limited company contractors.
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