Bad News for Contractors as PAYE Becomes the Only Way at Barclays

Categories: Business, Contractor, PAYE

The IR35 rules are anything but easy to understand, but forthcoming changes to off-payroll working have forced one of the UK’s biggest banks to dispense entirely with contractual work.

Recent news from Barclays confirms that it will soon insist on PAYE contracts only for all workers.

This means one of two things for those affected:

• Existing Barclays contractors will need to become full PAYE employees if they want their contracts extended after 1st October 2019.
• People who want to work for Barclays on a contractor basis from January 2020 must be on PAYE.

Why has Barclays changed its mind?

IR35 is a set of government rules that are designed to identify whether or not contractors are ‘disguised’ employees.

For instance, if a contractor has just one business for which she provides services, and operates from their office while using their equipment, she’ll likely fall within IR35 and will be expected to pay any tax and NICs due.

From April 2020, all businesses within the private sector will be made responsible for determining the IR35 status of contractors. This has been the case in the public sector for a while, but it represents a big change for businesses like Barclays, who clearly don’t want to be burdened with IR35 decision-making.

If contractors fall within IR35, they have to pay 13.8% of their salary in employer’s National Insurance. This could turn into a big liability for a large corporation like Barclays which has lots of employees who might be incorrectly categorised.

How will this impact contracting in general?

Dave Chaplin, CEO of ContractorCalculator suggests Barclays contractors should direct their anger at the legislation, rather than the bank.

Speaking in response to the news, Chaplin said, “this move is a direct consequence of very bad legislation. It’s absurd to suggest that 100% of the contractors working on critical Barclays projects are caught within IR35.”

Barclays isn’t the only bank making the change, either. HSBC and Morgan Stanley have responded in a similar fashion to the forthcoming IR35 changes by announcing they’ll only work with contractors who are employed by large consulting firms.

The long-term impacts of new IR35 rules on the contracting sector in general is hard to gauge, but it’s likely to be significant – particularly in the banking industry which has long been a major user of contractors.

What can banking contractors do?

If you’re a contractor currently working for Barclays or have been considering doing so, you’ll need to either take a permanent role or operate under an umbrella company instead.

This will reduce your earning potential considerably, but there really is no choice. The Government has successfully forced Barclays to declare that all of its contracts fall inside IR35 – even if that might not be true for some of them – illustrating how much of a David versus Goliath situation this is.

Operating via an umbrella company is likely your best bet in the meantime while the dust settles. Something may give; the IR35 changes have certainly caused enough of a fuss among the contracting community, after all.

If you’re confused or worried about the changes to IR35, or if you’re currently contacting for one of the major banks, our team would love to talk to you. Get in touch with them today to ask any questions you might have about the new legislation.