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IR35: insurance firm slammed for contractor ban

An insurance giant has been criticised for banning contractors in response to IR35 reform

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.

Zurich known for providing IR35 insurance

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.

Blanket bans are ‘needless’ 

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.”

Government urged to delay IR35 reform again

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.”

By Contractor Weekly

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25 thoughts on “IR35: insurance firm slammed for contractor ban”

  1. Gary Andrews

    “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.”

    How many acts of economic self-harm do you need to witness before the penny drops, this government doesn’t care about businesses or you.
    These UKIP/Tories only care about staying in power and perpetuating their extremist ideology while helping themselves to the nation’s wealth.

    Look at the cabinet, talent has been purged. Tory party funding now comes from either the UK corrupt or from overseas foes.

    • Gabriel

      “The forest was shrinking but the trees kept voting for the axe as its handle was made of wood and they thought it was one of them.”

    • jay cee

      Problem is do you think Labour would be any nicer to contractors?
      I dislike all politicians of all parties they are all self serving that is why they stand, to make themselves more important or make money usually both, so basing your argument around a party is devaluing it.

    • Sharon

      the Tories are no worse than any other political party when it comes to how contractors are treated.

    • Barry Hensall

      “The self-employed sector is now in its worst state in recent history” I agree with this statment Gary but “UKIP / Tories” !!! sounds like a left wing remainer rant.
      UKIP are against IR35 and would remove it.
      Clear The Swamp!

    • Barry Hensall

      “The self-employed sector is now in its worst state in recent history” totaly agree Gary but “UKIP/Tories”… sounds like a left wing rant.
      UKIP are against RI35 and would remove it.
      Clear The Swamp

      • Gary Andrews

        I’m not politically affiliated, just fact based. The (far) left would be just as ideologically driven, although it’s hard to imagine anyone could do more damage than this lot and anyway just a distraction from the issue.
        Your pro UKIP and Trumpist sentiments slightly give you away however. What’s your experience of contracting?

  2. Nigel Shaw

    Why does the HMRC treat every contractor like a tax evading criminal and go to extreme lengths to eradicate all ltd company contractors with preposterous conditions that even they have trouble determining yet they completely ignore the blatent client company tax evasion fraud of the umbrella company were no one benefits except the client company. Many contractors are forced into this dodgy practice by client companies who declare Tham as working as employees yet will pay no employer costs and give no employee rights to the workers who draw a fraction of there pay due to paying all the costs and deductions. Is this not Exploitation and Victimisation incited by the HMRC and the government?

  3. Big Bob

    I believe other large ‘National’ electrical distribution companies (nameless) have also introduced a blanket ban on Contractors and they are only engaging with agencies going forward.

  4. Paul Burd

    I have to agree with Gary this is the most inept and intellectually bereft government for some time.
    Have people forgotten Johnson’s “F*** business” comment?
    The problem is we have professional politicians in all parties. Gone are the days when a politician had experience of the real world of business & industry before becoming an MP

  5. Glen

    A few points here:
    1. How much of the backup reasons and beliefs that all persons working through limited companies is coming from HMRC and driving all politicians? Are the civil servants are advising the politicians with questionable data?
    2. Has anyone explained to HMRC that dividends are paid out after corporation tax is deducted. Therefore company tax of 20% is paid out before dividend tax of 7.5% (lower tax rate) or 32.5% (higher tax rate). So the ‘contractor’ is paying (leave aside initial allowances) 27% lower rate or 52.5% tax higher rate.
    3. The employer pays the employers NIC but this is not deducted from the employee’s salary so should not be considered in the equation of what the person receives as income.
    4. Overall, aside from a tax advantage point around the £40k mark, there is a tax disadvantage.
    5. Because Limited company income varies and is at risk, it is prudent to retain earnings in the company to be able to pay out salary or dividend during the lean times. HMRC still get their money albeit a little later.

    • Gary Andrews

      All good points that illustrate the complexity of the truth.

      Unfortunately, it can’t be distilled into a 3 word slogan for the tabloids and malleable masses. “Tax cheating contractors” is an easier sell. Throw in a massive discrepancy of power, a rogue HMRC and yet another industry gets “disrupted”.

    • XY

      You missed the key point. All employees pay the same tax rates – if you pay a large amount in dividends then yhour SA tax return will cause HMRC to extrapolate a notional gross salary and raise a demand for the difference between amounts due and paid.

      The dividend tax was intended to cover NI at punitive rates.

  6. Andy

    I used to think the tories were more supportive of a flexible contractor workforce, those with longer memories will know Labour introduced IR35. However I am beginning to think there is no choice “we are between a rock and a hard place”

  7. J Glock

    With Deloitte now joining the blanket-ban party, it’s all coming to a head. Pity that it’s a “pro-business” “low-tax” government that’s enacting these draconian reforms.

  8. Quil Ter

    My client forced all contractors to work inside IR35 via an umbrella co last year. Up until the [now delayed] change to IR35 they were more than happy to engage with PSC. Once the boot was on the other foot they just didn’t want to know. “Everyone must pay their fair share of tax” was one of their arguments. In other words, all PSC suddenly became tax evaders. Utterly disgraceful.

  9. XY

    IPSE are largely to blame here. They serially failed to understand IR35. Their pathetic calls for “certainty” were dense – they got it… “You’re all caught”.

    That’s certainty – we’re all sure that we’re unhappy with the outcome.

    My personal view is that IPSE are only interested in keeping the IR35 war going because without it, their raison d’etre evaporates. They were never in it to win it.

    That’s why they are now calling for another delay. That serves no-one except them. A delay just means another year of not knowing what our contract status will be after the new deadline hits….

    Just as now – if someone tells you a contract will be outside IR35, will you believe them? Or will you worry that they will re-assess it in April?

  10. Dan

    Face it, government is owned by the elite and they’re bringing us closer to Communism, day by day. You can dress it up however you want, but we’re going to all be on a national amount of money, and the bankers, big tech and corporations are going to close that middle class gap. History always repeats itself. Capitalism has built the world to THEIR standards, now it’s time for the Communism to sweep across the world. All started from “Covid19”.

  11. Glenn Dobbs

    No hypocrisy going on there haha. Like all insurance company slime, happy to give you an umbrella on a sunny day, then grab it back in the rain

  12. The T

    The last thing we need is another delay to IR35.
    Bring it on !!!

    The legislation is beyond ridiculous and either needs to be ruled out now or persevered with on April 6th.

    I won’t be interested in working for an Umbrella Company and will only work for Clients that correctly classify my Contract outside of IR35.

    I’ve refused Public Sector work outright since they went IR35. In the last few weeks some Public Sector Agencies have been sniffing around thinking they now have a level playing field; think again.

    Either Client”s retain me via my PSC or they take me onto their Payroll; take it or leave it. If the latter don’t expect me to take out £2 million of Professional Indemnity Insurance. Expect me to take holidays at critical stages of the project and provide me with 3 or 6 months Notice.

    I might start to develop “Stress” and need a few weeks off to recover, particularly when notified of termination. This might prove tricky as my average Project duration is 6 months.

    Until there is proper appreciation of the gamble and risks us Contractors take, the uncertainty risks, increase divorce risks, pension risks etc. These Civil Servants just don’t get it, but this will lead to a race to the bottom, and reduce Project flexibility.

    We can’t afford to make mistakes like say Public Health England. Hello the clue is in the name, your sole job is to look after the Public Health of England.

    The Civil Servants and the Treasury need to focus on their day jobs. If they seriously are looking to find £3 Billion via IR35 then Diane Abbott’s arithmetic is starting to look like Einstein’s in comparison to The Treasury & HMRC.

    Losing the Employment flexibility will cost way more than £3 Billion, and as articulated already the marginal tax differentials are negligible.

    Contractor’s currently pay Corporation Tax, as well of course Personal Tax, Employees National Insurance Tax, maybe Dividend Tax, maybe Value Added Tax, and almost certainly Employers National Insurance Tax. Plus Public Liability Insurance & Professional Indemnity Insurance.

    By all means calibrate one or other the 6 Taxes, but where is this jump to scrapping PSC’s.

    Is this going to also apply to Plumbers and Roofers. Maybe I need to classify my PSC as a Plumbing business !!!

    • Jamie

      I hear every word of this. destroying the contractor market does seem to be the intention and outrageously it’s acceptable for a dogmatic treasury to do this.

      I too will no longer be working late, giving up weekends, finding project saving new tech, saving face for bad project planners and a whole lot of other unpaid tasks to do everything in my power to get a project over the line.
      Zero rights = zero responsibility.

      Only when an industry dies do the morons who made it happen take notice. Ask the fishermen, hauliers, manufacturers, chemicals industry, farmers, equities dealers, Northern Ireland etc. etc.
      If gvmt not bothered about saving these then what hope do we have.

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