Two leading City companies have announced that they will no longer hire PSCs from March and February 2020, due to off-payroll working legislation reform.
Royal London Asset Management and Northern Trust, respectively an investment company and a wealth management company, are banning limited company contractors due to IR35’s expansion into the private sector next April.
Royal London Asset Management and its bigger parent Royal London Group informed its limited company contractors on Wednesday 13th November that they would have to use an umbrella company if they wanted to remain with the firm after February 14th 2020. The company added that “there will be no exceptions.”
Meanwhile, Northern Trust revealed that all of its ongoing PSC contracts would end on March 23rd 2020, and that those affected can either use an umbrella company, join Northern Trust’s payroll or “nothing at all”, according to an agent familiar with the arrangement.
The moves by Royal London and Northern Trust follow similar decisions taken by other financial firms, including Tesco Bank and RBS, with IR35 expert Kate Cottrell suggesting the trend could continue among big firms: “Large companies just deciding not to use PSC contractors is a real gift for HMRC, as there’s no need to carry out any future IR35 compliance checks … [As] these are all large companies, we know they have all had one-to-ones with HMRC. It will be interesting to see the reactions of others who have found themselves in this position. If the risks to them are too great, then no doubt many more are to follow along similar lines.”
There are some companies that are not making blanket decisions regarding IR35, with Balfour Beatty advising its limited company contractors that assessments are being carried out so case-by-case status determinations can be reached, while Wood Group, the energy and industrial services provider, has hired a tax adviser to analyse its PSCs’ IR35 statuses.
Ms Cottrell praised Wood Group’s position, saying: “It’s really pleasing that Wood plc are approaching this correctly by making individual assessments … Only then can they identify the risks they face”.
Qdos Contractor’s operations director, Nicole Slowey, has queried why all large financial companies are not following a similar approach: “The question I’d be keen to ask these banks is why they feel they can’t engage contractors compliantly outside IR35 while, at the same time, manage the risks they will often be exposed to from 6th April 2020”, she said. “Private sector firms understandably want to protect themselves from IR35, but that doesn’t mean they cannot work with genuine contractors safely outside the scope of the legislation.”
There are some signs that other financial firms may be heeding the advice of Slowey and other experts, with M&G Investments yesterday postponing its date to stop engaging PSCs from December 2019 to March 2020.
Qdos CEO Seb Maley has called on more businesses to take a more reasoned stance, commenting: “Companies who approach IR35 reform fairly and responsibly can really take advantage of the talent lost by those who don’t.” Harvey Nash director Colin Morley echoed this statement, suggesting proper assessments will avoid companies losing contractors unnecessarily: “We predict that there will be a merry-go-round of contractors leaving their current engagement where they are operating outside IR35, because the client will determine them inside IR35”.