Banks IR35 Decisions Seem Crazy. Are Contractors Missing a Piece of the Jigsaw

Banks IR35 Decisions
Banks IR35 Decisions

Banks IR35 Decisions

The big banks IR35 decisions seem crazy to contractors. They could quite easily get contractors to sit HMRC’s IR35 online test. This is called Check Employment Status for Tax (CEST). If a contractor passes this then he or she is outside IR35. He or she can continue to operate as contractors using personal service companies.

More than half of contractors pass the test. HMRC say that if a contractor passes the test they will not come after the company hiring the contractor for his or her taxes, penalties and interest – even if the contractor is shown to be inside IR35 afterwards.

So, the major banks can easily test their contractors and the 54% who pass it can continue to operate as PSC contractors. Those who fail (31%) and those who have indeterminable results (15%) will have to operate as PAYE payers.

Contractor Questions on Banks IR35 Decisions

  1. What has spooked the banks into a blanket ban on contractors?
  2. Why Don’t the Banks just test their contractors IR35 status?
  3. What Projects are the banks putting in jeopardy?
  4. Which banks are putting blanket bans on PSC contractors?
  5. What do the banks know that contractors don’t?
  6. What Percentage of Contractors do the Government Think Should be Inside IR35?
  7. Are the Banks IR35 decisions caused by future Government Policy on IR35?

What Has Spooked the Banks Into a Blanket Ban on Contractors?

What has spooked the banks, seemingly, is that they will now be the people who will determine their contractors’ employment statuses. If companies get this wrong they will be responsible for their contractors’ tax, interest and penalties.

However, as we stated previously, all they have to do to make their contractors sit the CEST test and HMRC will indemnify them if their test throws up a pass status when the contractor is really inside IR35.

This is hardly likely anyway as the test is heavily weighted in HMRC’s favour. They create the test.

Why Don’t the Banks Just Test Their Contractors IR35 Status

So, why don’t the banks just test their contractors then? Has a sudden and complete madness broken out in the higher echelons of the management of the top UK banks?

All of the banks to make an announcement on their IR35 policies so far have said that hey will operate a blanket ban on hiring contractors who use their personal service companies. Indeed, they are telling their existing contractors that they must dump their PSCs or leave.

Why, for heaven’s sake when they could just get them to sit the test?

What Projects Are the Banks Putting in Jeopardy

Because they are putting a blanket ban on PSC contractors the banks are putting in jeopardy some of their most important projects, i.e the LIBOR Decommissioning Project.

Whilst HMRC and he Government hope to make a billion pounds from contractors you are talking about trillions invested in the LIBOR project. Already the banks are trying to make assessments of the damage the self-inflicted IR35 blanket bans are likely to have on their projects.

Having a blanket ban on their contractors is a huge risk to them. If all of their contractors stay on and take huge pay cuts on their income they should be fine. Although de-motivation will be a factor here.

However, if the contractors take their skills and business and systems knowledge elsewhere then those projects crucial to the bank will be hit hard.

Indeed here will be an impact on the British economy as a whole.

So, why are they doing this? It doesn’t make sense?

Which Banks Are Putting Blanket Bans on PSC Contractors

The banks who have announced blanket bans on the use of PSC contractors are as follows:-

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

What Do the Banks Know That Contractors Don’t

Either they have all collectively become lily livered – or they know something we don’t. Perhaps they know that some other IR35 legislation is in the pipeline.

Do they know what this excerpt from the Queen’s Speech means?

“We will increase fairness and and flexibility in the labour market by stopping employers and workers experiencing significantly different outcomes from flexible forms of working.”

Some contractors see this as just confirming that the Government will implement the IR35 reforms in the private sector in April 2020. However, this is already known The queen’s speech generally has new policies in it. So it is likely that they are going to launch some other attack on contractors via IR35.

What Percentage of Contractors Do the Government Think Should be Inside IR35

As we said above, 54% of contractors tested by HMRC’s online test pass it.

However, recently Treasury Minister Jesse Norman said, when answering a question on IR35, that there was “only 10% compliance in this area”. A few weeks later HMRC said pretty much the same thing. So, the Government and HMRC believe that 10 times as many contractors who are now paying the IR35 tax should pay it.

That may hint at a nasty surprise coming up for contractors. That may well be in the Budget on November 6th. It could be highly ironic that in a giveaway budget just before an election the Government may still grab yet more cash from contractors. That shows how little the Government fears those who lobby on behalf of contractors.

Are the Banks IR35 Decisions Caused by Future Government Policy on IR35

Is it this that the big banks know? Is this the missing piece of the jigsaw that the big banks see and contractors do not.

The Chancellor, Sajid Javid, is from a banking background. Indeed he used to be Managing Director of Deutsche Bank. He will still have many contacts in the upper banking world. Is he, or his department, tipping the big banks the wink in advance of new IR35 legislation hat they are planning?

Is this why the big banks are issuing what seem nonsensical blanket bans on the use of personal service company contractors? What caused the banks IR35 decisions which seem to make no sense?

What do you think?

See Boris Johnson to Abolish Contracting in Final IR35 Assault

Please share this article using the social media buttons at the top and bottom of the page.

Ad – Contractor Services

Many private sector contractors are likely to be told by their client company either that they must operate as an off-payroll employee or join an umbrella company. It’s time to plan for that now.

They need to look at umbrellas ASAP.

Do you need an umbrella company that is right for you and returns you most?  Fill out the form below to receive a call today.

For all necessary business insurance, including IR35, click on Business Insurance for Contractors

    Your Name (required)

    Your Email (required)

    Your Telephone (required)

    Your Daily Rate (required)

    Please Fill in Answer to Simple Quiz Question




    Please enter your comment!
    Please enter your name here

    This site uses Akismet to reduce spam. Learn how your comment data is processed.