Latest IPSE research uncovers concerning impacts of the off-payroll working rules
Over a fifth of the UK’s contractors are planning to abandon their domestic clients and instead seek contracts abroad due to IR35, in a damning indictment of the legislation’s impact.
This is according to research released in June by IPSE (the Association of Independent Professionals and the Self-Employed), based on a survey of 1500 contractors which found that 22% plan to contract with overseas firms.
According to YouGov, an international research data group, survey sample sizes of 1500 or 2000 individuals are at lower risk of sampling error. This means that results are, broadly, considered to be statistically representative of the population at large.
As such, the results illustrate the impacts of the off-payroll rules on the UK’s contractor workforce overall, with IPSE’s Director of Policy calling on the government to “rethink its approach to IR35”.
Firms’ handling of IR35 drives talent drain
Since the introduction of the off-payroll working rules, many contractors have been forced to operate on the payroll of end-clients, or within the scope of the legislation – regardless of their true IR35 status.
This has seen them taxed as employees rather than as genuinely self-employed workers. Such risk-averse positions have contributed to the talent drain revealed by IPSE’s research, which also highlights other key issues related to IR35.
One of the major findings is that up to 10% of contractors cite the off-payroll working rules as the reason they’re not currently working.
Additionally, within the last 12 months, roughly half (53%) of freelancers have walked away from contracts where they would have been placed ‘inside’ IR35. Almost two-thirds (62%) of contractors plan to avoid such contracts moving forward.
IPSE’s latest research also follows similar findings it published in April this year from another survey. Those results revealed that almost 80% of contractors consider government tax policy to be the most detrimental factor affecting business performance.
Research should “raise alarm bells”
Commenting on the findings, Andy Chamberlain – Director of Policy at IPSE – called them “concerning” but also, ultimately, “unsurprising”.
“IPSE warned government for years that its plans to reform IR35 would make being in business too difficult, and that many genuine freelancers would turn their backs on contracting in the UK as a result”, he said.
“Freelancers and contractors are refusing to be corralled onto company payrolls. Instead, they are working with firms that respect their status as independent businesses, both at home and abroad.
“Many others, however, felt that it made more sense to retire early, or stop working altogether, rather than carry on in an increasingly unfavourable environment for self-employment, overseen by this government.
“Most alarming of all is the government’s decision to bury its head in the sand, rather than changing course and acknowledging the damage its own rules are inflicting on British businesses. This is a damning legacy for a government which has prioritised labour market participation”, he added.
Chamberlain also said that the trend was likely to “raise alarm bells for firms struggling with skills shortages”, and suggested that the government “must rethink its approach to IR35” if it is “serious about fostering a thriving economy”.