Nearly one in two contractors yet to receive Status Determination Statement (SDS), while half may challenge client’s IR35 decision
A new survey by IR35 expert, Qdos, has revealed that only 56 per cent of contractors have received an SDS from their client, despite this document outlining an IR35 decision being a legal requirement. The poll, of 1,846 contractors, is one of the first to explore how contractors and businesses are managing recently enforced IR35 reform.
Since the roll out of the controversial changes on 6 April, medium to large-sized businesses engaging contractors have been responsible for determining IR35 status. The tax liability has also shifted, from the contractor to the fee-paying party.
More than a third plan to challenge IR35 determinations
The survey found that 65 per cent of contractors had been determined inside IR35 by their hiring companies, compared to 35 per cent who were assessed as outside IR35. Around 4 in 10 (39%) of contractors said they will challenge their client’s IR35 decision, with a further 11 per cent thinking about disputing it.
Seb Maley, CEO at Qdos, said: “Reform has landed but that doesn’t mean it’s job done for businesses. […] Firms need to remember, preparing for IR35 reform was phase one. Phase two – which we have now entered – is ensuring compliance going forward.
“I’m not surprised that there’s clearly still work to be done and contractors aren’t convinced that reform is manageable. But even so, whichever way you look at it, contracting isn’t dead – nor will IR35 reform spell the end to working in this way.”
IR35 reform is ‘deeply damaging’
Andy Chamberlain, Director of Policy at self-employment trade body, IPSE, also commented: “It is very troubling – although perhaps not surprising – that over half (56%) of contractors have still not received an SDS from their client.
“This is yet more evidence that not only are the IR35 changes deeply damaging to the self-employed sector; they have also been introduced at the worst-possible time. Client businesses and contractors have been hit hard by the pandemic, and many clearly are not in a position to deal with the IR35 changes.”
Nearly two-thirds encouraged to use umbrella companies
Qdos’ study went on to highlight how nearly two-thirds (64%) of contractors said they had been told they could work via an umbrella company by their client.
The umbrella industry has come under increased scrutiny lately over malpractice and exploiting the freelance workforce, with industry experts urgently calling on the government to intervene and regulate what has been referred to as the ‘wild west’.
Chamberlain said: “What is also deeply concerning in this research is the approach of those businesses who have responded to the changes: pushing a high proportion of contractors into working through umbrella companies.
“The lack of regulation in this area means that all too many of them employ sharp practices that undermine contractors and rights. Government must urgently step in on the disarray in the wake of IR35.”