Royal Bank of Scotland initiates ‘pro-contractor’ IR35 reform policy

Royal Bank of Scotland has become the first big-name organisation that stands to be affected by private sector IR35 reform to take a “pro-contractor” stance, ContractorUK has learnt.(Editor's Note: RBS has responded to this article, here).

In fact, in contrast to the ‘cease and desist’ model of clients heading off the reform applying by simply no longer hiring PSCs, RBS is exploring ‘how to maintain’ its contractor usage.  

While this disclosure from an IT contractor inside the bank indicates that RBS is yet to pin down its arrangements, the rationale behind them sounds like a commitment has been made.

'Viable and sustainable'

“RBS seems to be pro-contractor because as far as we can see [the bank has got] people looking at how they can maintain a contractor market to deliver change,” the PSC says.

“There’s projects going on in the background to come up with viable and sustainable solutions [because] RBS will not be able to deliver strategic change without contractors.”

RBS has also written and circulated an email to some of its programme contractors, outlining practical steps that such PSCs can take to help keep IR35 at bay.

'Nothing is certain'

“Staying outside IR35 is crucial for the financial health of contractors,” the RBS email begins.

“Nothing is certain in an IR35 case, but here we put together some factors that seem to point to IT contractors being outside IR35.”

The cautiously worded email goes on to advise contractors under four headings -- Contractual (the advice is “courtesy of the Special Commissioner”); Substitution, Expenses and Sick Pay.

'It's all best-practice'

Additional outside IR35 signposts are also given on Equipment (“Use your own Computer”); Contract Renewal (“State explicitly what new work the contract is for”), and Timesheets (“Vary your hours”).

“It’s all best-practice [advice],” reflects Alan Broome of contractor accountants Broome Affinity, which is advising the RBS contractor.

“So there’s nothing in the email [from RBS] that a decent contractor or accountant shouldn’t already know. But it does serve to indicate what they’re thinking I'd say.”

And ‘thinking’ or ‘ planning’ – as opposed to ‘deciding’ or ‘finalising’ -- is the action of the day, according to research from Brookson Legal into 500 end-users facing the April 2020 IR35 reforms.

'Started to take steps'

Specifically, 55% of the engagers described themselves to the law firm as having “started to take steps to prepare”, chiefly in relation to compliance or to “understand their level of risk.”

The end-users quizzed were not named by the firm but, ironically, the three most popular actions by those engagers who are ‘taking steps’ are also the three RBS looks to have taken.

They are; review information from HMRC (43% of the preparing engagers had done so); look at PSCs’ contracts (43% done so) and communicate to contractors (40% done so).

'Refreshing'

Immediately after this trio, so the fourth action end-users prepping for IR35 reform are most likely to take, is the big one, ‘put new PSC policies in place’ (35% of the sub-sample had done so).

“Refreshingly, the businesses we are working with are taking IR35 reform seriously and putting processes in place which will enable them to make well-informed status decisions, in effect allowing contractors to continue operating outside IR35,” says contract review firm Qdos Contractor.

Seb Maley, the firm’s CEO also told ContractorUK: “There will always be companies that design elaborate methods to avoid reform, but on the whole, we are optimistic that the private sector will implement IR35 changes more successfully than the public sector. I imagine there will be some teething problems, but in the long run, I’m confident that firms are wise enough to manage changes.”

Editor's Note: Update on July 4th 2019 -- Royal Bank of Scotland denies 'pro-contractor' IR35 reform policy