Contractors perceive incoming changes to the IR35 rules as a greater threat to their business than either Brexit or the covid-19 pandemic, according to a recent poll of freelancers.
When asked what was their biggest concern over the next twelve months between the IR35 reforms, officially known as the Off-Payroll rules, the threat of coronavirus-related restrictions or the ongoing economic uncertainty caused by Brexit, sixty-two per cent of contractors indicated that the changes to IR35 are of most concern.
The Off-Payroll rules shift the responsibility for IR35 assessment onto end-clients, representing a significant compliance burden for most businesses, and many simply opt to circumvent the rules by banning contractors from working through limited companies. This forces even “outside IR35” contractors to work through umbrella companies, where they pay the same level of tax as employees but do not receive any of the statutory benefits. The rules, currently only in effect in the public sector, are due to be extended to medium and large sized engagers of contractors in the private sector from next April.
Covid-19 was the major concern for thirty-three per cent of freelancers, and only five per cent foresaw Brexit as an issue. 750 contractors were polled by IR35 specialists Qdos Contractor.
Forty-five per cent of contractors said they intended to continue working through a limited company even in spite of the changes to IR35 having taken effect, whilst seventeen per cent indicated that they would consider becoming a permanent employee in response to the changes. Nineteen per cent are considering closing their company once the new rules kick in. The remaining contractors are weighing up retirement or “other” options, such as expanding their business.
Seb Maley, chief executive of Qdos Contractor, said that the findings should reveal to engagers of contractors just how important it is to reverse contractor bans and take a pragmatic approach to the changes.
“While covid-19 poses an imminent threat to contractors, most of whom all but miss out on government support packages, it is IR35 reform that independent professionals are most concerned about,” he said.
“Some contractors have been told by risk-averse clients that they will no longer engage with them as contract workers, giving them no choice but to work on the payroll or face having their contract cancelled. This is a short-sighted, unnecessary and, in some cases, a non-compliant approach that should be avoided at all costs. “With only five months to go until IR35 reform, the onus is on hiring organisations and recruitment agencies to prepare for the changes. Contrary to speculation, IR35 reform is manageable, but the work must start immediately.”
17th November 2020.
