Contractors turn cautious about clients’ ‘individual IR35 testing’ claims

Microsoft, IBM and Deutsche Bank all quietly moving to ban limited company workers due to IR35 reform should be shining a positive light on clients testing PSC status individually.

But despite carrying experts’ backing for indicating ‘reasonable care,’ some case-by-case IR35 assessments are now producing conclusions quite close to blanket determinations.

In fact, at one financial firm, which was initially praised for refraining from the outright ban on PSCs (initiated by HSBC), the number of contractors ruled outside IR35 is in the single digits.

“Of their 1,800 PSCs offered for a test, 100 flat-out refused and so will quit, and just a single figure-handful dodged ‘caught,’” a source said at the firm, Aberdeen Standard Investments.

“But the tests were job-specific, so PSCs received an IR35 determination based on their role like Tester or Project Manager. Contractors’ line managers could challenge if they liked.”

'Personalised' letter

A person who saw the role-based tests (a model HMRC has endorsed) says they were well-executed, as “each PSC got their own personalised letter, containing the result and rationale.”

Online, a contractor at ASI sounded less enthused. “[There will be] no rate rises to cater for Employer NI, [the] same gross amount will be paid to either ‘Ltd’…or umbrella”.

He added: “ASI have said they are not interested; they will simply continue to pay the same gross day rate to the agency and it’s up to them and the contractor to sort it out.”

Another affected contractor reflected: “[The] vast majority of contract roles [were] put inside. Apparently, [the] assessment has been done but contractor[s] were not consulted”.

'Was told I'll definitely be assessed as inside IR35'

Contractors at Nationwide report a similar experience. One told ContractorUK in a statement:

“The building society’s in-house recruiter told me not long ago that although I will be assessed individually…I will definitely end up being inside. I won’t even be present either.”

Another financial services player, Newton Investment Management, has internally asked all its limited company contractor workers to convert to umbrella companies, or be jobless.

So large financial firms started the PSC ban and are still running with it (given the move by Deutsche – where Sajid Javid made his banking career), but smaller ones are following suit.

'Notice to terminate PSCs'

Rabobank in London is another example.

“I’m a limited company contractor at Rabobank in the UK, which will no longer engage PSC contractors beyond February 28th 2020.”

An anonymous submission to ContractorUK also states: “Rabobank will give notice to terminate PSC contracts with current terminate dates beyond that date.”

'Mid-sized engagers lack the clout'

Yet it is these comparatively smaller organisations which status experts say are having to think more carefully.

An IR35 adviser who was last night on the cusp of finalising a batch of status reviews said: “What I’m finding… [is that] large companies are doing blanket bans, and the medium-sized ones are trying to find a compliant method to continue to work with [PSC] contractors.

“These mid-sized engagers simply don’t have the clout of the large companies to do a blanket ban. That’s a very basic overview [of the current situation], but it’s largely reflective.”

'Sometime in the new two weeks'

However, the head of employment tax at a national accountancy firm yesterday cautioned that a business being big is no guarantee that IR35 reform prep has concluded – or even looks convincing in the short time left for implementation.

“[Only this week] I’ve seen a large business -- a ‘Plc’ -- be sent some [HMRC] factsheets and been offered an educational call with the Revenue, sometime in the next two weeks,” the tax head said. “There’s also going to be a ‘questionnaire approach’ [by HMRC] to decipher the level of preparation so far by the company.”

Editor's Note: To find out more about which businesses have already made decisions on how they will engage with contractors from April, you can check our list of companies and their positions on IR35 here.