Contracting Ends next April | Chancellor Intends Abolition

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IT Contracting Ends in April
IT Contracting Ends in April

Contracting Ends in the UK

It is looking increasingly clear that contracting ends in the UK from April 2020. Contracting has no future after that. This is increasingly clear. IR35 is going to be rolled out in the private sector. The results were disastrous when they rolled it out in he public sector in 2017. However, that is not stopping the Conservative Government from rolling it out in the private sector too.

A survey by Brookson Legal showed that 59% of companies are considering a blanket ban on using contractors in the future.

Banks Closing Their Doors on Contractors

Now three banks and an investment company have told their contractors that they will take on no more contractors. Contracting ends for them this year. HSBC, Morgan Stanley, Lloyds and M&G are telling contractors that they must either:-

  • Leave
  • Pay the IR35 tax
  • Become a staff member or
  • Contract through a 3rd party like an umbrella company

Contracting Ends – Contractors on Company Payrolls

Indeed Morgan Stanley said that even those contractors who decide to pay the IR35 tax will have to become permanent employees in 22 months. It is likely that HSBC, Lloyds and Morgan Stanley will not be the only banks to decide to have a blanket ban on contractors. There is likely to be a domino effect with more and more banks following their leads and issuing a blanket ban.

As 59% of companies aid they are considering a blanket ban, many companies in other sectors are likely to follow suit.

Contracting Ends in the Private Sector Too

Many contractors said, after the new IR35 rules were implemented in the public sector that the Government wouldn’t dare do it in the private sector. They said that private sector firms wouldn’t stand for it.

Well contractors can no longer turn a blind eye to it. The new IR35 rules are going to be rolled out in the private sector and many companies are going to be even more risk averse than public sector organisations. Who would have though that?

Contract Rates Will Plunge

This is a nightmare scenario. That’s not only for the UK’s almost 5m self employed, but for the client companies and/or the agency as well.

The payrolls of the client companies aren’t set up to deal with contractors who would receive no benefits like sick pay, maternity pay or pensions.

Client companies would be far less likely to use contractors if they had to take them onto the payroll. That would mean fewer contracts which would send contract rates plummeting.

With 59% of companies considering blanket bans on the use of contractors that would mean a lot less contract jobs around. With the same number of contractors competing for hose contract jobs this will send contractor rates plunging. These will be dark, dark days for contractors in the UK. Contracting ends then.

Contractors Working for Agencies

As client companies wouldn’t want to have contractors on their payrolls, who does that leave?

Yes, it looks like IT contractors would have to become employees of their agencies.

With contractors normally getting their contracts through different agencies that would cause mayhem – with contractors jumping agency every few months.

It seems that the Chancellor is doing this because he had been losing national insurance contributions from contractors and clients alike.

Contracting Ends Soon

However, in trying to fix this, it looks like he will be bringing an end to IT Contracting as we know it in the UK.

IT Contracting ends next April. In fact the beginning of the end will start this autumn with many companies likely to follow the banks and saying they’ll take on no more contractors.

IR35 came into place in 1999. Now it looks like 2019 will be the year that contracting ends as we know it. Even those contractors who manage to escape it will know that this is probably temporary. The Government see all contractors as tax avoiders and will be back for the rest later. Contracting ends one way or another.

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Comments

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6 COMMENTS

    • I don’t know what you expected to happen in April 2016 but a hell of a lot happened in April 2017. The Government changd dthe IR35 rules in the public sector so that the departments decided the IR3 5status of contractors instead of teh contractors. HMRC also produced a new online IR35 test. Tens of thousands of contractors in the public sector who used to operate through limited companies now use umrella companies with a huge drop in their income. There were major consequences for the public sector depts like the NHS. Now that is likely to happen in the private sector too. I don’t know what you mean when you say nothing happened. Public sector contractor would not agree with you.

      • They say, Chris, that there’s none so blind as those that won’t see. Tat’s the only thing I can think of to explain why Ian thinks nothing happened.

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