Zurich Insurance has reportedly become the latest high-profile financial services firm to announce that it will only continue to engage with contractors who provide services via an umbrella company from 6th April 2021 – when IR35 reform in the private sector is enforced.
Approaching off-payroll reform will shift the responsibility for determining a contractor’s employment status for tax purposes to the end-client, with the risk transferred to the fee-payer in the supply chain.
Zurich’s ban on contractors who work through their own limited company is also coming under fire because the company underwrites IR35 insurance products, which are sold to contractors and businesses to protect them from the risks posed by the legislation.
The Swiss-based insurer is known for underwriting policies – typically for contractors working outside IR35 – for several contractor recruitment and insurance companies.
A contractor working at Zurich Insurance told Computer Weekly that the firm had initially started preparing for the changes ahead of it coming into effect last year, by using HMRC’s Check Employment Status for Tax (CEST) tool to determine whether engagements fell inside or outside the IR35 rules.
According to this contractor, the “majority” of contractors were deemed “inside IR35” and subsequently told that if they wanted to continue working for Zurich, they could only do so via an umbrella company.
However, when IR35 reform was delayed due to the Coronavirus pandemic, Zurich continued to engage with contractors through their limited companies. But now with IR35 changes imminent, the insurance giant has resumed its blanket ban approach.
Seb Maley, CEO of IR35 insurance provider Qdos, said: “While contractor bans are a common issue in the financial services sector, given the nature of Zurich’s business, it is a surprising and needless decision by the firm. It once again highlights the need for better education and advice on the subject.”
Lobbying body, IPSE, that was formed in response to the introduction of IR35 in 2000, said Zurich’s stance shows why the government must defer reform once again.
Director of Policy, Andy Chamberlain explained: “The blanket ban on contractors by Zurich Insurance is exactly the kind of damaging decision the self-employed sector does not need right now.
“There were similar blanket decisions by banks and other large financial organisations early last year when the IR35 changes were originally due to take effect. It was because of large-scale disruption like this – just at the worst time, at the beginning of the pandemic – that HMRC decided to defer the changes.
“The situation for contractors and the economy has not improved. We therefore not only urge clients not to take rash and damaging decisions like this – but we also call on the government to at least delay the changes to IR35 – and preferably scrap them altogether. The self-employed sector is now in its worst state in recent history. The government must not commit an act of economic self-harm by undermining it further.”