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COVID-19 and IR35 reform threaten contractor exodus 

Pandemic and IR35 changes could see contractors quit

The combination of COVID-19 and next year’s reform to the IR35 rules threaten a “contractor exodus”, contracting authority Contractor Calculator has warned. 

Following a survey completed by over 1000 contractors, independent workers said they have experienced a significant downturn in business due to the pandemic, with 41% of respondents reporting that work has slowed down during the lockdown. 40% of contractors, meanwhile, said their clients have frozen work activity altogether. 

The impact COVID-19 is having on contractors combined with the arrival of IR35 reform in the private sector next April could see as many as 24% of independent professionals stop working this way, the data also reveals. Of this group, 88% have cited changes to IR35 as a key factor, while 76% stressed concerns about being able to find freelance work. 

One-third have not worked since lockdown

Fears held about the lack of freelance opportunities – which has resulted in 33% of contractors having not worked since the easing of the lockdown – are having a negative impact on contractors’ mental health and well being. Nearly one in three (30%) say anxiety or stress has impaired their ability to work, with 58% of contractors finding it difficult to remain productive while homeschooling children under the age of 18. 

COVID-19 support is inadequate

However, it was the Government’s “short of the mark” response to COVID-19 that has been contractors’ greatest source of stress, when focusing on the ongoing crisis. 77% of independent workers do not think the support available to the UK’s self-employed is adequate, no doubt largely due to the fact that limited company contractors are ineligible for the Self-employment Income Support Scheme (SEISS) and cannot count dividends towards the Coronavirus Job Retention Scheme (CJRS) – something the Government recently ruled out for ‘practical reasons’.  When asked about various business loans available to contractors, 62% said this is an “unhelpful form of relief.”

Contractor Calculator’s CEO, Dave Chaplin, elaborated on this point: “Contractors have been heavily affected by COVID-19 and many have grave concerns about their future. Government support for the self-employed has fallen short of the mark so it is little wonder that our survey sees 70% of contractors feeling stressed. Confidence amongst the flexible workforce appears to be at an all-time low, at a time when the economy will be looking to those crucial contingent workers to underpin its recovery.”

Labour favoured over Conservatives

The various challenges created by the pandemic have added to contractors’ worries, following confirmation that IR35 reform will certainly be rolled out, explained Chaplin: “The off-payroll tax combined with COVID-19 has hit freelancers hard.”  

As a result, 68% of independent professionals said they are less trustful of the Government following its handling of the crisis. In addition to this, 69% strongly disagree that the current administration has the best interests of the self-employed at heart. This distrust in the Conservative Party extends to the point where 22% of contractors said they would vote Labour in the event of a General Election, with just 17% favouring the Tories.

By Contractor Weekly

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14 thoughts on “COVID-19 and IR35 reform threaten contractor exodus ”

  1. The Oracle

    The whole point of creating the Covid drama was to destroy the world economy, so that a worldwide communist rule with a social crediting system can be implemented, where your (perceived) behaviour dictates how much you’ll get paid of you meagre state wage, and where big tech monitors your every move.

    Don’t believe any of it? Give it a year.

  2. Graham

    Yes, a combination of multiple factors are now hitting the viability of working.
    Clients, encouraged by agencies, are pushing rates down, and increasingly putting roles inside IR35.
    As the biggest IR35 issue is with expenses, anyone who doesn’t live within commutable distance of a role hasn’t a chance of being able to afford to apply. Try taking a contract at £450/day inside IR35 when you have to travel and stay in a hotel. It doesn’t work.
    Having said that, anyone who thinks they would be better off as a contractor under Labour is delusional.

  3. Rob

    I don’t know how any contractor could possibly vote Tory after this.

  4. ElectronicFur

    I’ve given up.

    Sod them. Have retired early.

  5. Branko

    with the inevitable, I’m just wondering, when is the best time to close my company. Do i wait till next year or should i close before then, with limited funds available I’m only able to stay afloat for another 2 months, however with depleted funds, i won’t have enough to pay my tax’s.
    I wish i could retire…

    • AliBaba

      Would furlough yourself first, then reinstate yourself to get the bonus and then make yourself redundant after appointing your cat as the director. Hector can write a letter to Mr Tiddles demanding his share.

  6. ExContractor

    Playing Devil’s Advocate here.
    Part of the deal (*) in being a contractor is taking on added/exceptional risk for extra pay. So, why should the government provide any extra support?

    (*) I understand that having a flexible workforce is a benefit for the country

    PS. £450 should adequately cover hotel and travel costs. For £450 a day, i’d travel to John o’groats and back again.

    • James Smith

      ‘So, why should the government provide any extra support?’….erm, because the government have decided we’re all actually disguised employees and not part of a flexible workforce thats a benefit to the economy.

      I don’t want any support (and fortunately haven’t need it), but the government want it both ways – we’re only in disguised employment until its going to cost them any money, then we’re self employed and need to stand on our own feet

    • XY

      For the same reasons it provided support to companies – the government has decreed that some people cannot work, although they are willing and able to do so, so the government foots the bill whatever artificial “employment status” the people may inhabit.

    • CurrentContractor

      This.. Exactly this. Although maybe not John o’ groats.

  7. XY

    Time to get out of contracting and preferably out of IT. If they think someone with my skills best serves Britain by running a B&B… good luck with that economy.

    Also time to have raise the point publicly that our Chancellor’s father-in-law is co-founder of the second-largest Indian consultancy. And who benefits most from IR35??

  8. Andrew

    Not wanting to rock the boat or anything, but any Contractor working within a Limited Company boundary is not self-employed. As such their business should have enough capital to help them ride the storm, just as any other business should. Yes, its not easy, but it’s business.

    • Andy

      Hardly business as usual eh Andrew but thanks for reminding us to plan for indefinite losses on an unfair playing field. Glad we could be a helping hand to those of you positioned to benefit, with a chip on your shoulder or axe to grind. Good luck to all, hope a better life awaits, probably doing something else and paying far less tax

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