Contractors say April’s IR35 reform is a bigger threat to their business than COVID-19 and Brexit uncertainty together
Research by IR35 specialist, Qdos, found that despite the ongoing Coronavirus pandemic, nearly two-thirds (62%) of contractors have said IR35 reform in the private sector poses the biggest threat to their business in the next 12 months.
According to the survey of more than 750 contractors, this is nearly double the number of independent workers (33%) who believe the economic implications of Coronavirus will have the worst effect on their business. IR35 changes are also a much greater concern than Brexit (5%).
On 6th April 2021, contractors will no longer be able to determine their employment status for tax (IR35 status) if they are engaged by a medium or large business. The controversial reform, which was deferred by one year due to the ongoing pandemic, will see a contractor’s client become responsible for assessing IR35 status, while the liability will be transferred from the individual to the fee-paying party in the supply chain.
‘Onus on businesses to prepare’
Qdos CEO, Seb Maley, said the research emphasised how important it is that businesses reverse contractor bans and take a pragmatic approach to the changes. He added: “While COVID-19 poses an imminent threat to contractors, it is IR35 reform that independent professionals are most concerned about.
“Some contractors have been told by risk-averse clients that they will no longer engage with them as contract workers, giving them no choice but to work on the payroll or face having their contract cancelled. This is a short-sighted, unnecessary and, in some cases, a non-compliant approach that should be avoided at all costs.
“With less than five months to go until IR35 reform, the onus is on hiring organisations and recruitment agencies to prepare for the changes. Contrary to speculation, IR35 reform is manageable, but the work must start immediately.”
The study also showed that while 45% of contractors intend to continue working this way despite IR35 reform, nearly a fifth (17%) plan on going employed in due course. 19% admitted they are considering closing their company as a direct result of the changes. Meanwhile, six per cent of contractors may retire because of the changes, with the remaining individuals exploring other options.
Trade body calls for further delay to IR35 reform
Andy Chamberlain, director of policy at self-employment trade body IPSE, commented on the findings: “These figures chime with our research, which shows that contractors are deeply concerned both by the impact of the pandemic on their businesses and also by the coming changes to IR35 in the private sector.
“Against a background of severe financial strain for many contractors, the government is still planning to push ahead with the hugely damaging changes to IR35 in April.
“Contractors and their clients were not ready for these changes before the pandemic and now the situation is worse. Implementing them early next year would do serious, unnecessary harm not only to contractors themselves, but also the businesses they work with and the wider economy.”