Almost half of all contractors state that they are going to continue contracting through a personal services company after April 2021.
HRreview previously reported on HMRC’s warning to businesses to ensure they are up-to-date with incoming changes to IR35 in 2021.
As it currently stands, IR35 applies if a worker or contractor provides their services to a client through an intermediary. However, this is changing in April 2021 as organisations that receive an individual’s service will have complete responsibility over deciding whether the off-payroll working rules apply.
New research from Qdos, a company specialising in IR35, reveals the significant impact that these new rules will have for contractors and organisations alike.
Almost half of contractors (45 per cent) have stated their intention to continue contracting even after April 2021.
Conversely, around 17 per cent stated that they are likely to become employees instead.
Almost one-fifth (18 per cent) state that they are closing down their companies. Of those who are predicting to stop contracting next year, an overwhelming three-quarters of them (75 per cent) have stated that this decision was directly influenced by the upcoming IR35 reforms.
The same number (75 per cent) of contractors stated that they did not have faith in their client to determine IR35 correctly whilst only four per cent of contractors felt that their client would. Over one-fifth (21 per cent) were unsure.
Earlier last week, insiders at Barclays shared that the bank was reportedly planning to cut PAYE contractors as a result of the new IR35 rules. HRreview has previously reported all the big banks in the UK banning the usage of contractors.
Seb Maley, Qdos CEO, commented:
While nearly all contractors want to carry on working via their personal service company when reform arrives, not all independent workers believe they will be able to. This is likely to stem from their experience in the public sector and from blanket and risk-averse decisions already made by private sector firms.
This means contractors are understandably split over their future, despite many not having had their IR35 status determined yet. I should stress, however, that there is a lot of positive work happening behind the scenes. In our experience, thousands of businesses are approaching IR35 reform quietly and pragmatically, ready to compliantly engage contractors outside IR35 when the changes land.
My advice to businesses planning to ban contractors in response to IR35 reform is to think again. In this economic climate, companies desperately need the skills, flexibility and savings offered by contractors. IR35 reform may be needless and very short-sighted, but it is manageable.
To employers preparing for the incoming changes to IR35, Seb Maley said:
Start preparing immediately. Form an IR35 strategy – a clear and timelined plan for managing the reform – and one that identifies exactly what’s needed to ensure accurate IR35 assessments, minimise disruption and safeguard your liability.
For example, consider case by case IR35 status reviews that are supported by IR35 insurance – this combination prioritises IR35 compliance and protects against the risks posed by the reform.
*To obtain this data, Qdos surveyed over 750 contractors.
Monica Sharma is an English Literature graduate from the University of Warwick. As Editor for HRreview, her particular interests in HR include issues concerning diversity, employment law and wellbeing in the workplace. Alongside this, she has written for student publications in both England and Canada. Monica has also presented her academic work concerning the relationship between legal systems, sexual harassment and racism at a university conference at the University of Western Ontario, Canada.
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