The number of banks taking extreme action to next year’s IR35 changes continues to grow, with Royal Bank of Scotland (RBS) said to be the latest financial services firm that will stop working with contractors because of IR35 reform – a move which would see RBS backtrack on the promise it made only in July to keep its contractor workforce.
According to a memo seen by Contractor UK, RBS will stop engaging contractors working through personal service companies outside IR35 from 28th February 2020. This is less than two months before the bank will be tasked with determining the IR35 status of the contractors it brings on board.
Instead, contractors working at RBS have been given two options: move onto the payroll or work through an umbrella company. This is in contrast to reports earlier in the year, also from Contractor UK, which said RBS will continue to engage independent workers when IR35 changes arrive on 6th April 2020.
RBS now joins Lloyds, Barclays, Tesco Bank, HSBC and Morgan Stanley in taking what IR35 experts have described as a “short-sighted” approach to IR35 reform. Compliance firm, Brookson Legal, was one of a number of specialists that offered its view on the situation, with compliance director, Matt Fryer stating: “While it may seem like an easy solution in the short term, it removes access to a skilled contractor workforce that wishes to remain flexible. This may damage businesses ability to scale resource up and down at short notice.”
Several major banks’ reaction to IR35 reform hasn’t come as a surprise to one IT contractor, who criticised these businesses for “treating contractors badly for years.” Andrew Neil, who has felt the full impact of the IR35 legislation, having been pursued by HMRC for £100,000 in the past, said: “Banks just don’t get how important contractors are to IT. They assume they are glorified typists. Shame on the banks for not standing up to HMRC bullies.”
Reports of RBS’s strategy for IR35 reform comes at a time when MPs are “demanding action” from banks over the increase in IT problems, which a Treasury Committee Report described as “unacceptable.”
However, in culling IT contractors, system failures and online crashes that impact customers are to be expected, explained Qdos CEO, Seb Maley: “By getting rid of contractors, the likelihood is that banks will face further problems down the line. These firms, after all, rely on the niche skills and expertise of independent workers, who provide business-critical services. Forcing contractors onto the payroll is a knee-jerk and unnecessary reaction to incoming IR35 reform, which could easily result in these workers leaving their projects at banks and taking on roles outside IR35 elsewhere.”
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