Research by umbrella company Cool Company among 500 UK freelancers has found that 47 per cent are paid via an umbrella company, with 37 per cent of those contractors having joined an umbrella company in order to avoid IR35.
Furthermore, 33 per cent of respondents are paid through PAYE at their own limited company, while 20 per cent are paid through dividends. 14 per cent said that they had found it harder to get work since IR35 came in, with 52 per cent of that number attributing difficulty finding work to businesses only working with umbrella company contractors.
54 per cent felt that clients were unwilling to use the complicated IR35 assessment system. 48 per cent, meanwhile, said clients were not offering an increase in pay or bill rates and 46 per cent reported clients being more hesitant overall when it came to engaging contractors.
All of this has contributed to an uptick in umbrella company use, with Cool Company reporting an 811 per cent increase in users and a 1,000 per cent increase in invoices processed over the past year.
The survey also had positive findings, however, with 78 per cent saying that they had been able to secure more work since the rules came in and 64 per cent saying that they were earning more.
Cool Company’s Head of B2C Kris Simpson said: “Since the introduction of IR35 in April 2021, there has been a rapid increase in the number of contractors and freelancers turning to umbrella companies to avoid red tape.”
“Between August 2020 and August 2021, the number of sent invoices processed through Cool Company increased by 1,000 per cent. That’s a significant figure for any business. But while it’s positive for us, it does highlight the fact that many contract and freelance workers have had to find new workarounds to deal with the new legislation.”
“However, with the majority seemingly securing more work, what many feared would be a negative story has more of a positive outlook. And for the 14 per cent who are facing a reduced level of contracts, it seems to largely be a case of a lack of understanding on the client’s part, which can be remedied over time.”
