UK banking giant Barclays announced it would no longer engage contractors who provide their services via a personal services company, limited company, or other intermediary, unless they work on a PAYE (pay as you earn) basis.

The shift will see Barclays avoid potential liability for tax and national insurance contributions due to IR35 legislation.

The IR35 Off-payroll Working Rules which currently apply to the public sector, will be extended to medium and large businesses in the private sector from 6 April 2020.

In a memo sent out to line managers, Barclay said that in light of the upcoming changes, it would “instruct its agencies and managed service providers to engage contractors on a PAYE basis only for new or renewed contracts.”

“From 1 October 2019, Barclays will not extend the contracts of contractors who provide their services  via a personal services company, limited company, or other intermediary beyond February 2020,” the memo reads.

“This means for contractors paid via agencies, contracts must not extend beyond the end of February and for contractors paid via procurement, their services must cease by 14 February and invoices submitted by 29 February. From 1 January 2020, new contracts and contract extensions will be arranged on a PAYE basis only. Contractors who provide their services via a personal services company, limited company or other intermediary, and who choose to continue working for Barclays can do so on a PAYE basis,” the memo reads.

Seb Maley, CEO of Qdos Contractor, commented, “If the bank is to go ahead with this, they will lose out on the flexibility and savings achieved when compliantly engaging contractors outside IR35 - something that we expect most private sector firms to continue enjoying when the changes arrive.

“Reports of businesses mismanaging IR35 will always capture the headlines - and rightly so, given the impact it has on contractors’ livelihoods. However, behind the scenes, there are many private sector businesses quietly preparing to compliantly engage contractors outside IR35 from April 2020 onwards,” Maley continued.

ContractorCalculator CEO Dave Chaplin also commented, “Under the new Off-Payroll legislation, Barclays is not prepared to take any risks come April 2020 when the reforms hit the private sector. 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."

Staffing Industry Analysts published a Guide to Implementing IR35 Off-Payroll Working Rules in April 2019.