Simon Butler, head of mortgages at broker CMME, says IR35 creates “further complexities” that some high street lenders are “not equipped to deal with”.
“Since April we have found that more people are overall concerned that these lenders will understand their working status even less, especially for those who have been contracting for themselves and moving inside of IR35 and now working through an umbrella.
“Essentially, mixing a history of self-employment via a limited company to the present day when monthly payslips are received,” says Butler.
But Super Contractors’ Hunter says some lenders are now accommodating to contractors switching from a limited company to an umbrella, “by flexing their lending criteria to facilitate umbrella arrangements, in recognition that these are still the same highly skilled mobile contractor clients as the ones who previously used their limited company contractor mortgage criteria”.
Hunter also notes some lenders, such as Skipton Building Society, do not differentiate between contractors operating through a limited company and those operating through an umbrella company, and will still use the contract day rate value to assess income.
And according to TSB, provided the applicant is on a day rate contract and income can be evidenced as per its standard policy for day rate contractors, they do not differentiate between how a business is set up.
A spokesperson for the bank says that any contracts provided to evidence income would need to show the name of the applicant personally, irrespective of whether there is an umbrella or limited company.
“There isn’t a one size fits all approach when considering contractors,” remarks Andrew Chalton, private client director at broker LDNfinance, which works with a large number of self-employed contractors mostly in the IT and financial services sectors.
“Therefore to our benefit we are able to lean upon our vast network of specialist lenders, which isn’t limited to your typical high street banks.
“As changes occur to taxation law, the requirement for a specialist broker becomes even more apparent as a fundamental tool to navigating an ever-changing and complex market.”
Chloe Cheung is a features writer at FTAdviser