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Barclays tells contractors it’s PAYE or nothing

Barclays planning to scrap its contractor workforce

Following reports that HSBC will stop engaging PSC contractors as a result of IR35 reform next year, it has now become apparent that Barclays will also refuse to work with contractors operating through limited companies before April 2020.

In an email, which was sent to UK line managers, the bank explained that “as a consequence” of changes to the IR35 legislation, which will see private sector companies tasked with administering IR35 status and often held financially responsible by HMRC for any mistakes, Barclays “will no longer engage contractors who provide their services via a personal services company.”

Barclays also stated that from 1st January 2020 it will only engage workers on a PAYE basis, having ruled out extending the projects of the limited company contractors it currently engages past February next year. 

“Short-sighted” but not a “typical response” to reform

In reaction to the news, Qdos CEO, Seb Maley, described the move as “short-sighted” and “unnecessary” given the bank will “lose out on the flexibility and savings achieved when compliantly engaging contractors outside IR35.”

However, he also made the point that “this is not a typical response” to IR35 reform and nor does he expect it to become one. With contractors understandably concerned by further reports of a bank taking a risk-averse approach to IR35 reform, Maley said “behind the scenes there are many private sector businesses quietly preparing to compliantly engage contractors outside IR35 from April 2020 onwards.”

“A taste of the chaos to come”

IR35 lobbying body, IPSE, criticised the Government for rolling out controversial changes to the legislation which will see contractors lose the right to determine their own tax status. Deputy Director of Policy, Andy Chamberlain, said Barclays’ decision was “just a taste of the chaos to come” and called on the Government to “halt and reconsider the changes to IR35.”

He then urged other businesses not to follow Barclays’ lead, arguing that it “makes a mockery of the Government’s claim that the genuinely self-employed won’t be affected by the April 2020 rules.”

Barclays “not prepared to take any risks”

IR35 commentator and CEO of Contractor Calculator, Dave Chaplin, echoed IPSE’s concerns, describing the move as a “direct consequence of very bad legislation” and that in giving contractors no choice but to work PAYE or leave, Barclays has shown it’s “not prepared to take any risks come April 2020.” He also said “it’s absurd to suggest that 100% of the contractors working on critical Barclays projects are caught within IR35.”

As previously mentioned, Barclays is not the only bank apparently taking this drastic course of action. HSBC is also planning a workaround to IR35 reform, while it has also been reported in Computer Weekly that Lloyds is also set to offer contractors an ultimatum – a course of action that contractor accountancy, QAccounting recently dissuaded engagers from doing.

Have you been impacted by Barclays’ announcement? 

By Contractor Weekly

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19 thoughts on “Barclays tells contractors it’s PAYE or nothing”

  1. Chris

    I can’t see how this can be anything but a disaster for Barclays. Do they imagine that contractors will accept going on the payroll, or do they believe they will easily find replacements for those who leave (surely the vast majority). Either way they’re wrong.

    • John C

      I suspect they will be replaced by staff from the large IT service companies. A certain country has a large number of IT staff and is making access to UK IT market a pre-requisite of any free trade deal. I wonder if the Government attack on the contract market has a little more to it than just raising more tax?

      • gary

        and what country would that be John C?

      • The Q

        >I suspect they will be replaced by staff from the large IT
        >service companies. A certain country has a large number of
        >IT staff and is making access to UK IT market a pre
        >requisite of any free trade deal. I wonder if the
        >Government attack on the contract market has a little
        >more to it than just raising more tax?

        Much like in 2001 onwards, in the aftermath of the
        “dotcom” crash, when vermin like Ann Swain were
        lobbying True Labour that there were skills shortages in
        the CIT sector and that (cheap) overseas labour was
        necessary, when the reality was that the sector was in a
        global recession and the jobs in the UK were not there.

        FYI it took quite a while for the govt to remove such
        skill sets off the “shortage” register.

        Anyway, this is all moot.
        The Tories clai to have been the party of business,
        yet they have done more damage with IR35 than the
        politnik morons like Primarolo could ever have hoped to
        do in the CIT sector.

    • Jonathan

      Guess HMRC’s estimate is if all/lot of contractors choose to leave there aren’t enough jobs to go in the short term, so they will choose not to leave and accept the PAYE.

    • paul

      I think that contractors have no choice. We have no leverage from any professional body. Some will accept, some will take perm, some will get fixed term contracts. What has happened in the public sector is higher day rates and bundled work packages given to intermediaries at say £850 a day, they then sub contracts at much lower rates and try to pass on the non delivery risk. So those that took off shore or 3-4 years in one place have killed the industry for the real contractors that provide interim cover, SME on projects. So the London based im in Lloyds 4 year xxxx programmer getting paid offshore has utterly screwed it for those who paid their Corp Tax, did 2 or more contracts a year on average.

  2. Paul

    I know this is easy for me to say as I’m not currently working at a bank, but the only way to fight these decisions is to boycott organisations like Barclays and HSBC. This can be done by refusing to work for them and by moving business and personal bank accounts away from them.

    This only works if everybody does the same.

  3. Chris Higgins

    What do you expect from organisations that expect the tax payer to bail them out when their business fails.

    Can anyone suggest a ‘honest morally sound’ bank to transfer my account to, please

  4. gary

    I don’t bank with these w*nkers but if I did I’d be moving my account immediately. The best thing barclays contractors can do is to look elsewhere for work. If I was there, I would start looking right now and keep looking until I found something, and happily hand in my notice, even with a pay hit to send out the message that HMRC are a collection of c*nts for trying to kill off the private contracting industry. They are a truly evil organisation that DOES NOT understand how business works, and tries to tax everyone as if we all work for them. Well they can GTF and I hope everyone sends them the same message!

  5. Robert Smallwood

    Barclays just lost their competitive edge. Perhaps they don’t need to as they’ve no economic reason to be at the forefront. Let’s go elsewhere..

  6. guy

    Start replying to some of those emails they must be regularly getting offering roles – I can’t be the only one getting them.

    Give termination notice. Drop ’em in it.

  7. Murray

    National Grid has given notice to all it’s contractors that as of the last day of February 2020 they will no longer have a job.

  8. Richard

    (Speaking largely from my standpoint as an IT / Software contract resource) The corporate world is heavily augmented by contract resource – we are the people they do not want to add headcount for, or need to run from project budget spend. This will not change, there will still be a need for niche skilled flexible workers.

    So what will happen to blue chips making short sighted choices like this ?. I cant see them ponying up to offer current contractors equivalent PAYE salaries *and* all the accoutrements of a perm employed position that would be seen as overspend and would enrage existing perm employees (which makes my next statement even more comical).
    So all that will happen is this will play into the hands of big consultancies, who must be currently rubbing their hands at the prospect of all their entrepreneur small business competition being removed in one fell swoop.

    Currently big consultancies are able to charge two to three times a PSC consultants day rate, and in many cases dont even have the same level of expertise as said PSC resource to boot so the client pays more, for less. It will be interesting to see how high big consultancies day rates climb when all their competition is removed and they have an instant monopoly to supply these companies,maybe the long term end game will be even more dismal off shoring ?.
    If HMRC thinks they will gather more tax when big consultancies (or offshore providers) are supplying these clients they are even more hard of thinking than they already appear. Seems pointless to me.

    As a side note my personal and business accounts have been with Barclays for the last 30 ish years. I guess it’s time to change.

  9. Charlie

    There is a petition here that needs 100,000 signatures for the IR35 issue to get debated in parliament, please sign it:
    https://petition.parliament.uk/petitions/262354

  10. Biggles

    More overseas outsourced resources will fill the gap. They are 1/4 of the cost of UK based contractors

  11. john

    the result will be, contractors with lots of saved cash, taking a long holiday and planning their future beyond HMRC, those without savings going PAYE (with the permanent benefits) and not the IR35 no benefits but everything to lose route, a number will also move and contract abroad

    net result for the Government dinosaur of negative growth and imagination- zero increased revenues and it will all be blamed on Brexit 🙂

  12. Phil

    You can’t blame Barclays for doing this, I understand that will be a very controversial comment to make except that it is HMRC who have created this situation by looking for better tax revenues from the workforce.
    Barclays will outsource or like some have said bring in external professional service companies all of which is possible and as a contractor I am getting inundated by recruitment companies looking to staff uk professional service companies in anticipation of the demand over the next six months.
    Unfortunately even though most of these companies are advertised as work from home they ultimately require you to travel to the customer site which in all cases can be UK wide, fine if you dont mind all that travelling.
    Long term this will sort itself out and the Banks will need to offer higher wages if they want people to travel into areas outside their normal commute.
    In the short term flexibility will be the casualty in all this, getting a project team together will become a lot harder as contractors decide to either retire, move into other areas of work closer to home or go abroad to places like the UAE, the shortage in uptake will mean places cant be filled.
    Long term this will level off, companies will need to bring in new staff from graduate recruitment and train them up.

  13. My Good Name

    Barclays “will no longer engage contractors who provide their services via a personal services company.”

    They protect themselves and someone else will take the IR35 risk. You’ll see agencies opening small consulting companies/structures and then engaging the banks to do projects, etc.

  14. Jonathan

    All the best contractors are moving to the fin-tech companies anyway. Ir35 is the least of Barclays problems, they’re losing customers at an alarming rate to these fin-techs.

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