I don't think many end clients will engage limited company contractors as inside IR35. I believe end clients will hire contractors as individuals via a PAYE umbrella or via agency PAYE.
Any end client's engaging with PSC's on an inside of IR35 basis is just asking for employment tribunal trouble.
To be honest, in many contractor accountancy firms the client ratio is around 1 accountant to 200 contractor clients. If say 100k (i.e. 20%) clients close then 500 senior/semi-senior accountants will lose their jobs. In addition, these senior / semi-senior accountants are normally supported by junior accountants and therefore another 500 jobs will go there too. So, theoretically, a 1,000 accountancy jobs will be lost by the end of next year. That is a lot of unemployed accountants.
Can you imagine if these huge contractor accountancy firms lost 75% of their client base. For sure they would go bankrupt and for sure there would be a lot if unemployed accountants.
I reckon at least 20% of contractors will be lost. This could easily increase to 30%. A 75% closure rate would be an absolute disaster for the industry. Especially for firms like Clearsky, Brooksons and JSA who own around another 20 contractor accountancy firms. I can't believe these firms are purchasing other contractor firms (unless they are getting a really good price).
There has been a enormous number of contractor accountancy firms selling up to the likes of Clearsky (backed by Optionis), JSA (backed by universal partners) and Brooksons (backed by The Riverside Company) in the last 5 years. These 3 super contractor firms (backed by private equity partners) alone own at least another 20 contractor accountancy firms because these 20 contractor accountancy firms (including SJD) have cashed out knowing that their business value is diminishing fast. These 3 private equity backed super-contractor accountancy firms (clearsky, brooksons and jsa) all appear to be racing with each other to see who will get an IPO so that the private equity companies get their investment back. I fear that these private equity companies are going to lose a lot of money because they have valued these contractor firms pre-off payroll rules! A financial disaster waiting to happen in my opinion.
Why would the HR directors care if the contractor gets investigated retrospectively? If the contractor gets investigated retrospectively then its the contractor's problem not the employer's problem.
Many of the banks are looking to employ contractors via PAYE once they get them to stop using their Ltd companies in February 2020.
You can't blame the banks for wanting to avoid having to do thousands of individual status determinations every 6 months, having to deal with thousands of appeals, employment tribunals, etc. Its a waste of their time and money. The banks will also save on VAT by employing the contractors via PAYE (as currently the banks have to pay VAT that the contractors charge via their ltd companies).
In my humble opinion, I believe contractors are not a scare resource. I believe they are generally a flexible resource. They just come in when the bank requires a bit of extra help on a project but do not have enough staff. They are a bit like locum doctors or temporary agency workers. Given that loads of contractors will be losing their jobs in the next few months there will be plenty (around 100,000) looking for work. These 100,000 contractors may not even be able to secure work due to the uncertain political/economic climate.
As for salary rise, although this may happen because the banks won't need to pay 20% VAT anymore. I don't think the salary rise will be that large because the banks will need to pay 13.8% employer's NI and 0.5% apprentice levy on top of the salary. In addition, due to the uncertain political/economic climate the banks may decide to scale back their plans and therefore they could end up being a lot of unemployed contractors come April 2020 competing for fewer and fewer PAYE roles (which would drive wages down).
When push comes to shove it looks like the banks can't be bothered to individually assess thousands of contractors every 6 months. You can't blame them, it is a big undertaking. HMRC have banned blanket outside IR35 assessments. It looks like the banks are unwilling to hand over the control and substitution clauses necessary to create outside of IR35 roles. The banks want people that they can fully control as the information they hold is so sensitive. The banks may even save some money on this PAYE exercise as they will no longer need to pay the VAT that the contractor charges when they put the contractor onto PAYE.
Banks must take a whiter than white stance. Don't make me laugh.
HSBC in USA (Mexican drug lords, in Europe Swiss bank money hiding), Barclay's executives in Court, Dankse Bank £billion money laundering etc. etc. Then the PPI saga.
Then "take a permanent job (If there is an appropriate role and their skills merit it)" Yes happy to employ you as a contractor (Role and skill certainly come into play) but not as an employee as maybe your skill not good enough or there is no job.
Flawed legislation, obstinate enforcement, riding roughshod over contract law.
Like you say, this has nothing to do with banks trying to be whiter than white. The banks can't be bothered to assess thousands of contractors every six months and having to deal with thousands of contractors appealing their IR35 status and going to employment tribunals, etc. The banks (e.g. HSBC, Barclays, Lloyds, Morgan Stanley, M&G Investments, etc) position makes perfect commercial sense. Plus the banks and other financial service institutions generally can't reclaim the VAT that the contractor charges and therefore putting the contractor onto PAYE saves them from having to pay VAT.
I wonder how all the big contractor firms, e.g. Crunch, SJD, Clearsky, JSA, Maslins, etc are going to cope post 6 April 2020? Surely these firms are just going to end up like Thomas Cook? E.g. they will lose around 20%+ of their clients, then potentially run out of cash! Looking at JSA Services Ltd's group accounts they made a £1.1M loss in 2018 (and £250k loss in 2017) and that is before the new off payroll rules come into effect! Surely these types of firms are just going to go under? Hopefully this results in more clients for the rest of us!
My answers
I don't think many end clients will engage limited company contractors as inside IR35. I believe end clients will hire contractors as individuals via a PAYE umbrella or via agency PAYE.
Any end client's engaging with PSC's on an inside of IR35 basis is just asking for employment tribunal trouble.
Must be nice to have these types of problem!
To be honest, in many contractor accountancy firms the client ratio is around 1 accountant to 200 contractor clients. If say 100k (i.e. 20%) clients close then 500 senior/semi-senior accountants will lose their jobs. In addition, these senior / semi-senior accountants are normally supported by junior accountants and therefore another 500 jobs will go there too. So, theoretically, a 1,000 accountancy jobs will be lost by the end of next year. That is a lot of unemployed accountants.
Can you imagine if these huge contractor accountancy firms lost 75% of their client base. For sure they would go bankrupt and for sure there would be a lot if unemployed accountants.
I reckon at least 20% of contractors will be lost. This could easily increase to 30%. A 75% closure rate would be an absolute disaster for the industry. Especially for firms like Clearsky, Brooksons and JSA who own around another 20 contractor accountancy firms. I can't believe these firms are purchasing other contractor firms (unless they are getting a really good price).
There has been a enormous number of contractor accountancy firms selling up to the likes of Clearsky (backed by Optionis), JSA (backed by universal partners) and Brooksons (backed by The Riverside Company) in the last 5 years. These 3 super contractor firms (backed by private equity partners) alone own at least another 20 contractor accountancy firms because these 20 contractor accountancy firms (including SJD) have cashed out knowing that their business value is diminishing fast. These 3 private equity backed super-contractor accountancy firms (clearsky, brooksons and jsa) all appear to be racing with each other to see who will get an IPO so that the private equity companies get their investment back. I fear that these private equity companies are going to lose a lot of money because they have valued these contractor firms pre-off payroll rules! A financial disaster waiting to happen in my opinion.
Why would the HR directors care if the contractor gets investigated retrospectively? If the contractor gets investigated retrospectively then its the contractor's problem not the employer's problem.
Many of the banks are looking to employ contractors via PAYE once they get them to stop using their Ltd companies in February 2020.
You can't blame the banks for wanting to avoid having to do thousands of individual status determinations every 6 months, having to deal with thousands of appeals, employment tribunals, etc. Its a waste of their time and money. The banks will also save on VAT by employing the contractors via PAYE (as currently the banks have to pay VAT that the contractors charge via their ltd companies).
In my humble opinion, I believe contractors are not a scare resource. I believe they are generally a flexible resource. They just come in when the bank requires a bit of extra help on a project but do not have enough staff. They are a bit like locum doctors or temporary agency workers. Given that loads of contractors will be losing their jobs in the next few months there will be plenty (around 100,000) looking for work. These 100,000 contractors may not even be able to secure work due to the uncertain political/economic climate.
As for salary rise, although this may happen because the banks won't need to pay 20% VAT anymore. I don't think the salary rise will be that large because the banks will need to pay 13.8% employer's NI and 0.5% apprentice levy on top of the salary. In addition, due to the uncertain political/economic climate the banks may decide to scale back their plans and therefore they could end up being a lot of unemployed contractors come April 2020 competing for fewer and fewer PAYE roles (which would drive wages down).
When push comes to shove it looks like the banks can't be bothered to individually assess thousands of contractors every 6 months. You can't blame them, it is a big undertaking. HMRC have banned blanket outside IR35 assessments. It looks like the banks are unwilling to hand over the control and substitution clauses necessary to create outside of IR35 roles. The banks want people that they can fully control as the information they hold is so sensitive. The banks may even save some money on this PAYE exercise as they will no longer need to pay the VAT that the contractor charges when they put the contractor onto PAYE.
Like you say, this has nothing to do with banks trying to be whiter than white. The banks can't be bothered to assess thousands of contractors every six months and having to deal with thousands of contractors appealing their IR35 status and going to employment tribunals, etc. The banks (e.g. HSBC, Barclays, Lloyds, Morgan Stanley, M&G Investments, etc) position makes perfect commercial sense. Plus the banks and other financial service institutions generally can't reclaim the VAT that the contractor charges and therefore putting the contractor onto PAYE saves them from having to pay VAT.
I wonder how all the big contractor firms, e.g. Crunch, SJD, Clearsky, JSA, Maslins, etc are going to cope post 6 April 2020? Surely these firms are just going to end up like Thomas Cook? E.g. they will lose around 20%+ of their clients, then potentially run out of cash! Looking at JSA Services Ltd's group accounts they made a £1.1M loss in 2018 (and £250k loss in 2017) and that is before the new off payroll rules come into effect! Surely these types of firms are just going to go under? Hopefully this results in more clients for the rest of us!