Tesco Bank IR35 Shock – No Limited Company Contractors After January

Tesco Bank IR35 Shock
Tesco Bank IR35 Shock

Tesco Bank IR35 Shock

Contractors are reeling once again from the latest Tesco Bank IR35 shock. Previously, Tesco Bank said that they would no longer use limited company contractors after March. They would honour contractors’ contracts up to then. Now they have announced that they are bringing this forward. They will no longer use personal service company contractors after January 31st.

Contractors Questions on Tesco Bank IR35 Shock

  1. What Options are Tesco Bank offering contractors?
  2. What will Tesco Bank’s contractors do?
  3. Which banks will operate a blanket ban on Limited Company Contractors?
  4. What is causing this Tesco Bank IR35 Shock?
  5. Why Do the Banks Not Just Test their contractors for IR35?
  6. How many contractors pass HMRC’s IR35 test?
  7. How will this affect the banks major projects?
  8. How much will the Government make from these IR35 changes?
  9. Why is the Party of Business, interfering in a market that works exceptionally well

What Options Are Tesco Bank Offering Contractors

Although they are offering a few contractors permanent jobs, they are giving most contractors two options They can leave or they can operate via a third party like an umbrella company. And this has been brought forward to January.

It seems that this has not gone down very well with contractors. Morale has plummeted it seems.

What Will Tesco Banks Contractors Do

Most contractors now want out However, all of the banks to declare so far have said that they will have a blanket ban on hiring limited company contractors.

That does not mean that all banks will operate a blanket ban on contractors. After all, there is no need to make an announcement if you are not going to operate a blanket ban on the use of personal service companies.

We know of one bank which is hiring contractors with contract dates past April 6th. It is also renewing personal service company contractors beyond that date.

Which Banks Will Operate a Blanket Ban on Limited Company Contractors

Among the banks to have announced a blanket ban are:-

  1. Barclays Bank
  2. RBS
  3. HSBC
  4. Lloyds Bank
  5. Tesco Bank
  6. Morgan Stanley

Isn’t it strange how often the major banks seem to act in unison. These announcements are not being made in other sectors yet. However, the major banks, once again, appear to be doing the same thing at the same time.

What is Causing This Tesco Bank IR35 Shock

The Government announced that from April 6th 2020 that they will implement the changes they made in the public sector in 2017 to the private sector too.

The main IR35 change is that freelancers will no longer determine their own IR35 statuses. The hiring companies will now decide contractors IR35 statuses.would have to do would be to test their contractors to see if they are inside IR35 or outside.

HMRC have even produced an online IR35 test to help them.

Why Do the Major Banks Not Just Test Their Contractors for IR35

This should not have been a major problem for the banks. All they had to do was make their contractors sit the Check Employment Status for Tax test.

If they failed it or the results were indeterminable the contractor would have to pay PAYE usually through an umbrella company. If the contractor passes the test then he, or she, would be free to continue to operate via a personal service company.

HMRC even said that if a contractor passed the CEST test they would not chase companies for the contractors tax even if it was shown later that he or she was really inside IR35.

How Many Contractors Pass HMRC’s IR35 Test

Here are the results so far for those taking the test:-

  1. 54% – Outside IR35
  2. 31% – Inside IR35
  3. 15% – Indeterminable

So, why did the major banks not do this? It would mean that they would be able to keep a major part of their flexible workforce.

Why did bank after bank announce that they would no longer use limited company contractors when they did not have to?

Why, even HMRC are using contractors now after issuing an initial blanket ban on them.

How Will This Affect the Banks Major Projects

This is going to affect the banks major projects like the regulatory LIBOR decommissioning project which must be completed and implemented by a certain date.

The banks use of permanent employees and freelancers is what they consider to be the best mix. If some outside factor causes them to change what they currently believe is the optimum use of contractors then something will have to give. This will result in lower profits and lower tax receipts from them.

How Much Will the Government Make from these IR35 Changes

The LIBOR decommissioning project is a project which is worth trillions across the banks. Compare that to the £3 billion that HMRC say they will bring in over 4 years from the IR35 changes. They cannot even make a billion a year from it. Yet they are willing to put at risk the profitability of all Britain’s major companies by forcing them to operate in a way that the companies don’t think is the optimum way of operating.

The banks and HMRC are gambling that contractors meekly accept their fate and move into, for example, umbrella companies where their PAYE and NI can be easily extracted. They obviously don’t belive that morale is important.

If the contractors don’t meekly accept their fate then this will devastate British industry with the banks at the forefront of this.

Why is the Party of Business Interfering in a Market That Works Exceptionally Well

Here we have a Conservative Government, supposedly the party of business, interfering in the market. What happened to the ‘light touch’.

The banks seem to be acting against their own interests. After all, if the LIBOR and other projects fail or are delayed there will be major financial consequences for the major banks.

Yet they are taking a massive risk. If many of their contractors leave they would be taking huge business and systems knowledge with them. They would also be taking many years of experience with them too.

However, if they all act the same way, i.e all issue blanket bans on limited company contractors then the contractors would have nowhere to go within the banking sector. They would have to move out into some other sector.

You might think that here is some sort of coordination here. Let’s hope not.

So, why the TESCO Bank IR35 shock. Why are the big banks all putting blanket bans on contractors when that could be devastating for their businesses? Do the big banks know something that we don’t?

See Boris Johnson to Abolish Contracting Profession in Final IR35 Assault

What some contractors have done is set up an IR35 group for contractors so that they can discuss what is happening amongst themselves. See Contractors Set Up IR35 Group to Organize Resistance – Join Up

See Tesco Bank IR35 Decision – All Freelancers Will be Inside IR35

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