RBS, contractors and IR35

[Antthe]

Someone I know very well contracts here. There has been talk of RBS showing willing to work with the Ir35 reform and keep contractors but interestingly neither he nor any of the other contractors on his project have received this apparently 'contractor wide' email.

[Guesstimator]

If some clients take this approach and others take the HSBC approach, there will no longer be a 'market rate', there will be two rates. Those who want to maintain a high level of control, and don't want to give a real right to substitution, will pay more for the privilege, and those who are willing to work as if their contractors really are businesses will be able to pay less.

Yep. Assuming RBS carry this through by deed and not just word, then by dint of the fact they're having an open conversation they are creating a real marketplace for services.
Again with the assumptions, but by the simple fact they are actively showing an engagement and understanding already places them one step ahead of the competition for skills.

All it takes is for a few to break ranks with the rest and IR35 will eventually be put to bed in the manner it should be: with clients fully understanding, appreciating and acting within that legislation by shouldering some of the responsibility for their resourcing requirements where they've previously been of the opinion 'that's for you to sort out'.

[GhostofTarbera]

Funny - RBS has culled 90% of contractors in the past 5 years replacing with Indian outsourcing companies


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[webberg]

Case law is quite clear that such a clause is not compatible with employment, if it is real, whether it is used or not. And such a clause would give an 'outside' result in CEST which would make a challenge very unlikely to succeed or, indeed, happen.

If RBS wants their contractors to be outside IR35, chances are they have two choices -- accept some risk, or change some things. If they choose the latter and agree to cede a real, reasonably unfettered right of substitution, they will have accomplished their purpose, and will be able to get good contractors at a lower rate than people like HSBC will have to pay for the same quality.

If some clients take this approach and others take the HSBC approach, there will no longer be a 'market rate', there will be two rates. Those who want to maintain a high level of control, and don't want to give a real right to substitution, will pay more for the privilege, and those who are willing to work as if their contractors really are businesses will be able to pay less.

All very valid points.

You are correct that a substitution clause weighs very heavily in the CEST (and all other) tools used to measure inside/outside IR35. It weighs heaviest when it is in a contract and actually used.

We have seen it suggested for instance that the contractor having secured the gig, arranges for a substitute to go and pick up their door pass etc prior to starting work, thus proving substitution has taken place. My view is that this is unlikely to be seen as substitution.

We saw a discussion on this in the recent TV personality cases. In brief, Acroyd had no right of substitution in practice whereas Kelly did not need to have it as she was the show. When Kelly was not there, it was a different show.

My point here is that the "old think" is that something in a contract - often but not always - inserted to achieve a tax result is not enough on its own to make the objective, if it is not intended to be used and not actually used.

The most effective means of showing that the contract has meaning is for as many of its provisions to be used.

I totally agree that there will be a two level market on contractor rates.

[webberg]

Someone I know very well contracts here. There has been talk of RBS showing willing to work with the Ir35 reform and keep contractors but interestingly neither he nor any of the other contractors on his project have received this apparently 'contractor wide' email.

I'm wondering how much of this is being driven by RBS (who I know are conservative in all tax matters, having worked there) and how much by their recruiters/agencies (Lorien I think are prominent?).

[webberg]

All it takes is for a few to break ranks with the rest and IR35 will eventually be put to bed in the manner it should be: with clients fully understanding, appreciating and acting within that legislation by shouldering some of the responsibility for their resourcing requirements where they've previously been of the opinion 'that's for you to sort out'.

Except that the post April 17 public sector reform (and presumably the model for the private sector copy) says that the end client can make a decision but if they get it wrong, will not be picking up the bill.

The "that's for you to sort out" will now rest with the fee payer, an entity already wielding huge power over the individual contractor, and from the evidence we have seen already, they are not being shy about signing up to all sorts of risks because they have made sure that the contract with the individual has sweeping indemnity and liability clauses.

Unfortunately I think that the individual contractor will now have more potential problems landing in their lap.

[Antthe]

I'm wondering how much of this is being driven by RBS (who I know are conservative in all tax matters, having worked there) and how much by their recruiters/agencies (Lorien I think are prominent?).

Lorien definitely driving things in my understanding.

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[Barry Badrinath]

I'm not sure where this has come from. I'm 99.9% sure that not all RBS contractors have received this email, it just seems to be hearsay and rumour.

[ascender]

Lorien are driving things because they've got thousands of contractors there. I think a couple of people have recently left RBS to take up jobs with Lorien to specifically look at how they're going to address it.

Nobody I know there has seen any communication about IR35 and in the meantime they're shedding contractors; technology are apprarently not allowed to renew anybody past February until there's a plan in place and if you've been there for 35 months without x number of months out of the company they're also not allowed to renew the contractor.

Word seems to be that at the moment there is no plan and at the moment the vast majority of their Lorien contractors will be inside IR35.

[webberg]

I think that the pattern described here will be repeated many times.

The big users of contractors very often have a limited number of large recruiter/agencies servicing their needs.

All of those big recruiters/agencies are now facing a complete change of business model as the end client seeks to de-risk their engagement of contractors.

The recruiters/agencies will no doubt have close working relationships with the end clients and are perhaps working with them to devise policies for the new world.

At the end of the day however the net result will be fewer contractors working that way. This reduces agency fees and for some this is existential.

An agency encouraging an end client to be lenient in its application of the IR35 status rules, risks being held liable as the fee payer. That's a potentially tricky balancing act.

I very much fear that agencies and other intermediaries will be looking to individuals to recoup lost revenue and encourage individuals to be at the margins in terms of IR35.