Against a backdrop of intense skill shortages, the financial services sector risks losing access to a major talent pool because of a knee-jerk reaction to IR35 legislation. That is according to specialist insurer, Kingsbridge.
From April this year, businesses engaging independent workers will become responsible for setting the tax status of these individuals. As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the worker.
In response to these changes, a number of high-profile banks – including HSBC, Morgan Stanley, Barclays and Lloyds – have revealed that they will no longer engage with contractors who work through personal services companies, instead employing individuals on pay-as-you-earn (PAYE) terms or via an umbrella company.
“While at first sight this may seem like a risk mitigation exercise, it’s actually a wholly unnecessary knee jerk reaction” says Nicola Hayman, Legal Manager at Kingsbridge. “Even by HMRC’s own calculations, the vast majority of PSC contractors are genuinely self-employed – and by placing blanket bans on professionals who choose to work in this way, banks are missing out on access to a valuable pool of talent.”
“According to data released last month by the Office for National Statistics, the number of self-employed workers in the UK has now reached a record five million people, representing 15.2% of Britain’s workforce. It is clear that highly skilled workers increasingly crave autonomy. Any business which presumes that PSC contractors will automatically move across to PAYE – rather than looking for opportunities elsewhere – may be in for an unwelcome surprise. However, with the right processes in place to protect against risk, there is no reason why organisations should not continue to engage genuine PSC contractors.”