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1,500 businesses have their say on IR35 reform

Firms share their thoughts on IR35 reform

With the IR35 review open and the introduction of reform to the Off-payroll working rules less than three months away, 1,500 businesses impacted by the legislation have shared their views on the incoming changes.

The research, conducted by IT consultancy, Be Digital UK, whose clients include the Cabinet Office and the Department for Workplace and Pensions, offered valuable insight into how companies are preparing for IR35 reform. 

Only 65% aware of changes

That over a third of companies are not aware of incoming reform at this stage in the proceedings is worrying, explained Be Digital UK’s spokesperson, Richard Tyler: “The results of this research clearly highlight the need for businesses to gain a much broader understanding of what the upcoming IR35 (reform) means and how it will affect their company.”

Voicing similar concerns was Qdos CEO, Seb Maley, who encouraged private sector firms to get to grips with the legislation immediately: “The clock is ticking towards 6th April and given the lack of any meaningful help from the Government, it’s vital that companies equip themselves with the skills and expertise needed to make accurate IR35 decisions before reform lands.”

41% of firms to review hiring strategy

Approximately 4 in 10 businesses intend to review their strategy around engaging contractors as a direct result of changes, with 11% stating they will likely reduce contractor numbers. That reform could deter firms from engaging contractors is a concern regularly expressed by the likes of IPSE, whose Deputy Director of Policy, Andy Chamberlain, has previously said: “Now, as April 2020 approaches, major banks and businesses – vital drivers of the UK economy – are starting to panic at the plans to extend the changes to the private sector. Some are even telling their contractors they must join as employees or stop working for them altogether. Out of fear of these changes, they are destroying their flexible workforce.”

21% have switched to a Statement of Work

In preparation for 6th April, around one in five businesses affected by the reforms have apparently drawn up a Statement of Work (SoW) with their contractors. An SoW is typically in place between a consultancy and its clients. Among other details, it outlines project length, fee, deliverables and timescales. With an SoW in place, the provider of the service will decide the IR35 status of the contractor placed, not the client. 

While Be Digital UK’s Richard Tyler said “acquiring services using outcome-based SoW’s is a sensible way of reducing risk”, Seb Maley of Qdos did point out that contractors should think carefully about working under one: “Drawing up an SoW is a decision that contractors mustn’t take lightly. The SoW must be genuinely outsourced and not merely a provision of labour masked as a consultancy agreement. Needless to say, HMRC is aware of any ‘workarounds’ to the incoming changes.”

45% are confused

Nearly half of the businesses surveyed said they were ‘concerned’ about what action to take next. According to IPSE, indecision stems from the complexity of the IR35 legislation, which has been criticised for being confusing and ambiguous to the extent where HMRC itself cannot understand it. 

IPSE’s Andy Chamberlain said recently: “If HMRC, with all its resources and expertise, cannot make an accurate IR35 determination, how can it expect anyone else to get it right? The Government must urgently reconsider any proposals to shove responsibility for determining IR35 status onto end-clients.”

32% think changes are fair

Finally, nearly one in three businesses believe IR35 reform is fair. As Be Digital UK puts it, these businesses are of the view that the “changes proposed in IR35 are a positive step in ensuring fair pay and taxation implementation on UK contractors.”

By Contractor Weekly

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7 thoughts on “1,500 businesses have their say on IR35 reform”

  1. JJ

    I work for a large client affected by IR35. Within my team, there are off-payroll workers who fall into a few of different categories:

    (1) Those who have LTD companies and work via an agency.

    (2) Those who work via a consultancy company and are paid as permies for that consultancy company.

    (3) Those who work via a consultancy company but sub-contract to that consultancy company via their own LTD company.

    The client has determined that types (1) & (2) fall inside IR35, but type (3) are outside.

    Everyone in the team is treated exactly the same in terms of ways of working, financial risk, substitution, control, etc. Does anyone have any idea how the consultancy companies might be slipping through the net ? Or, is the client playing a dangerous game and putting themselves into HMRC’s firing line ?

    • IR35 syrvivor

      I was always under the impression it was the big consultancies that promoted IR35 to Red Dawn Primorolo

      They are the only ones who will gain from IR35

      Contractor loses
      HMRC loses
      UK loses

      Offshore Win BIG
      Big consultancies win BIG

  2. Dog Head

    The “bean counter” lobby is extremely successful at creating “smoke and mirror” totally unnecessary complexity

    There is no argument about making a process fair… however, there appears no desire whatever to implement any such application against giant companies, especially those involved in www.

  3. Phil the Pill

    Will end up costing more to police by HMRC than it will ever grab back from us minnow. Meanwhile big business gets off free and the 2% tax on internet giants is to be “put on hold” while globally they decide on a policy (LOL) under threat of yet another Trump imposed trade sanction………wonder how many years that will take and will it ever be back dated?

  4. IR35 survivor

    My company will close in the next few weeks.

    I will move on to a temp fixed term role.

    There are no safe guards and the money is half of what I generated.

    HMRC will receive around £16k rather than the £50k they previously received.

    It is utter madness to undermine the knowledge sector like this but hey HMRC are above the law.

  5. Jon

    I think leaving the UK so I am able to continue contracting will turn out to be the best decision I’ve ever made in my life.
    Having my own company and contracting gives the flexibility to invest my own robotics R&D projects and will allow me to gain investors, being forced into into a full time employment role would have ruined everything.
    Farvel UK

  6. Perplexed

    In the event that a client advises a contractor that the extension of their assignment will be inside IR35 and that they will need to contract under a nominated umbrella company. Does the contractor have the right, whilst the client is the ‘deemed’ employer, to claim employment rights of that client?

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