Schroders Bank IR35 Decision
The Schroders Bank IR35 decision is that contractors will no longer be able to use their personal services companies from the end of March. Indeed they are going to blanket ban contractors using PSCs. All posts that they hire contractors for in the future will be inside IR35.
All their existing contractors will have to convert to PAYE or leave the company.
Contractor Questions on Schroders Bank IR35 Decision
- What will happen to the much praised flexible workforce?
- Why are older contractors retiring early?
- What are other contractors doing as regards the IR35 changes?
- Why do contractors fear being tested by HMRC’s tool CEST?
- Should Contractors Take HMRC’s Test or Decline to take it?
- What Repercussions will Schroders Bank IR35 Decision have?
What will happen to the much praised flexible workforce
This is contracting in Britain in 2020. The much praised flexible workforce will be under an attack that they might not survive.
The Government pay lip service to the part that freelancers play in the economy. They constantly sing the praises of the flexible workforce marketplace.
Yet, they appear to be doing everything they can to spoil it. Because of the new IR35 changes in the private sector many older contractors are deciding to retire early.
Why are older contractors retiring early
They are giving two reasons for that:-
- Freelancing will not be as lucrative from April 2020 and they ave already built up a nest egg to see them through retirement.
- If they agree that their role is inside IR35 they could open themselves up to an investigation by HMRC on their previous earnings. After all, if they stayed on, they’d be filling a role which their client company say is inside IR35
What are other contractors doing as regards the IR35 changes
Other contractors are now taking contract offers in Europe. Others still are deciding to take some time out of the market hoping that companies blanket banning contractors will be forced by the marketplace to relax their policies banning personal services companies.
Others still feel that they will have to quit their client companies rather than take PAYE roles. They are worried, like the retiring contractors, that if they take a role which is now designated as inside IR35, HMRC will say “well you must always have been inside IR35” and will investigate them for back tax, interest and penalties.
Why do contractors fear being tested by HMRC’s tool CEST
Those contractors who are working at companies, like Sainsbury’s, who are testing contractors using HMRC’s Check Employment Status for Tax and failing them all are particularly fearful..
The reason is that the role that they are currently doing has been tested as being inside IR35. That would mean, according to the company, that they would really always have been inside IR35 while doing that role. Yet they have been using personal service companies both at their current client and at previous companies.
Should Contractors Take HMRC’s Test or Decline to take it
If a company runs a test on a contractor they have to give the results to HMRC ‘for future reference’. So, HMRC will know that each particular contractor has failed their IR35 test.
If contractors are not going to take an inside IR35 PAYE job at the company and they can see the company failing all the contractors there, the contractor would be better off not taking the test.
What Repercussions will Schroders Bank IR35 Decision have
The whole of the banking sector is blanket banning contractors. What damage will it do to them if they lose a lot of their contractors? What will happen to mission critical computer systems if a lot of their contractors leave?
And what will happen if they cannot get their regulatory systems done on time? What will happen as regards the LIBOR decommissioning project if they cannot get their systems done on time?
Oh, what a merry dance we lead!
And all to gain the equivalent of less than a tenth of a penny on income tax.
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