Contractors won’t return despite IR35 changes
by Jasmin Swayne
New research has found that a large proportion of contractors will never return to employment despite impending changes to IR35 regulations in the public sector, which potentially threaten the future of contracting in the UK.
The controversial rules, which have been strongly criticised by industry experts, will transfer responsibility for determining a contractor’s tax status from the individual contractor (as now) to the public sector end-client or recruitment agency.
Those who condemned the proposals as unworkable and unfair include Umbrella Company trade associations PRISM and the Freelancer and Contractor Services Association (FCSA), the Association for Independent Professionals and the Self-Employed (IPSE) and recruitment bodies the Recruitment and Employment Confederation (REC) and the Association of Professional Staffing Companies (APSCo).
The Government, however, decided to proceed with implementation, and the new rules will take effect from 6th April.
The new study was conducted by Qdos Contractor, a tax advice company for contracting professionals, and it suggests that the majority of the UK’s independent workforce intend to remain so.
The survey polled 1,947 contracting professionals based in the UK and found that:
- 95 per cent expect that impending changes to IR35 rules in the public sector will diminish the benefits of working on a self-employed basis.
- More than 50 per cent will never return to employment status despite the rule changes.
- 46 per cent will contemplate employment.
- Only four per cent intend to become employed.
Although the majority of these respondents seemed determined to maintain their independence, most believe that the public sector will now lose out on the benefits of hiring flexible professional contactors: 85 per cent will not continue their public sector contracts if their self-employed status is altered and will transfer to the private sector instead
Commenting, Seb Maley, CEO of Qdos Contractor, said that the study reveals that a significant proportion of contracting professionals are sufficiently confident to refuse the option of employment – positive news in what is undoubtedly a time of appreciable uncertainty for the public sector.
He added: “Understandably, contractors are feeling threatened by incoming IR35 changes, with many planning to stop working on public sector contracts should they be found caught by the new IR35 rules.
“With the right guidance and support, though, the UK’s contractor workforce should be able to continue to benefit from working independently — and in the public sector — without the fear of wrongly being deemed inside IR35 by public sector clients.”
Last week, Association of Recruitment Consultancies (ARC) Chairman Adrian Marlowe urged public sector end-clients to temporarily transfer all their limited company contractors into PAYE Umbrella solutions to allow sufficient time to assess their tax status under the new rules. If caught by IR35, public sector contractors may choose to remain as Umbrella Company Employees.