IR35 will lead to exodus of half of contractors

The roll out of IR35 is having an adverse effect on mental health for less than a third of contractors and will lead to more than half of them leaving their clients in the next two months.

inniAccounts, a contractor accounting firm, carried out research which states that 31 per cent of contractors are suffering from mental health issues due to IR35 and 53 per cent are planning on leaving their clients. Less than one-tenth are self-employed as they find it to be a good way to cope with a disability they suffer from.

Also, it is believed this departure of contractors will cost the UK economy £2.2 billion.

Under one-tenth (9 per cent) of contractors are set to fall outside of IR35, 23 per cent have been “banned by clients without assessment” and 28 per cent are still waiting to find out the result of their status.

In October 2019, all “big four banks” Royal Bank of Scotland (RBS), HSBC, Lloyds and Barclays placed a ban on the use of contractors in preparation for IR35.

James Poyser, CEO of inniAccounts said:

Taking the stance that contractors will stay on your terms because there is no alternative is short-sighted.

The majority of contractors are engaged in project delivery so they are well aware of the impact their decision to leave will have on the business and they are not afraid to vote with their feet and let it happen. Nor are they afraid to emigrate abroad and take their skills to countries where they are wanted.

Ultimately, they don’t want to be forced into a position whereby they are denied their right to be self-employed, and instead be pushed into false employment with no benefits or rights because the company is running scared of HMRC.

What’s more, in the grand scheme of things, they will pay far less in tax than they are today. Investors, regulators, HMRC and stakeholders will be facing utter jeopardy if this reform is not halted and thought through properly.

On the 07/02/20, HM Revenue and Customs (HMRC) said the review in to IR35 has already led to a change. The new rules will not apply to contractors who carried out jobs before the 6th April but have not been paid yet, as previously it would have affected such workers.