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Will contracting continue to grow after IR35 reform?

After it was confirmed by the Government that IR35 reform will be introduced to the private sector in April 2020, much has been made about what the future of contracting will look like.

There are people and businesses that believe independent working as a career choice is under threat, with the introduction of further IR35 changes restricting flexibility in the labour market, leaving individuals with no choice but to operate inside the rules.

IPSE, for example, has a strong opinion on the matter. In reaction to the announcement of private sector IR35 reform, the lobbying body said these changes could have a ‘catastrophic impact’ on contractors and potentially ‘force’ them out of business.

In contrast, you then have those with a more optimistic outlook. These individuals and organisations do not support reform to the IR35 legislation (you’d do very well to find anyone other than HMRC that does), but they have faith in engagers to recognise the value of the independent workforce in time and believe they will make sure they are capable of administering the rules accurately.

IR35 expert, Qdos, for example, has a pragmatic view of the situation. While it doesn’t condone the Government’s tax strategy, their opinion is that by taking the appropriate steps, engagers will be in a position to make well-informed status decisions that allow contractors to work safely outside the scope of IR35.

There are plenty of parties that remain undecided – those who just don’t know how the situation will play out. Understandably, these individuals aren’t sure if the Government’s treatment of contractors will impact the independent workforce in the long term.

These three different opinions were each represented by contractors in the latest Qdos survey, in which over 1400 independent workers offered their views.

No doubt feeling defeated by the impact of IR35 reform in the public sector, 40% of contractors do not think independent working will continue to grow in the UK in years to come. This figure outnumbers those who think the opposite by two to one. 20% are of the impression that contracting will continue the upward trend it has experienced in recent years. The remaining 40% of independent workers told Qdos they aren’t sure and do not know what’s in store.

Taken together, that 80% of contractors do not have a positive outlook tells you everything about how this vital sector of the labour market feels it has been treated by the Government. The introduction of IR35 reform in the public sector has resulted in thousands of contractors being incorrectly taxed, while HMRC’s approach to enforcing compliance in general among these workers leaves a lot to be desired. Take the controversial 2019 Loan Charge – a recent House of Lords report into the taxman’s powers was very clear in its criticism of HMRC’s behaviour towards contractors, thousands of whom will be affected by the retrospective tax.

Widespread concern for the future of independent working also shows that public sector reform has not been successful. If it had been, arguably contractors would be less fearful of the potential impact of next year’s changes. Predictably, HMRC is of the opinion that public sector reform has been a success, which tells you everything you need to know about what contractors are up against.

These survey statistics must also serve to reinforce the argument that private sector engagers need to take IR35 reform seriously. Many experts have stressed the importance of preparing for reform in 2019, and well in advance of the 2020 roll-out. This is an opinion held by specialists across the board and even, to a certain extent, by HMRC. In the recently published IR35 Forum minutes, the taxman promised to “provide support and guidance to help businesses implement the off-payroll working rules and ensure the guidance is appropriate to the larger and more diverse public sector.”

Looking ahead to the future of contracting, there seems to be a growing opinion among specialists that if the private sector takes a proactive approach to IR35, reform to this controversial legislation does not necessarily have to halt the further growth of independent working.

By Contractor Weekly

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3 thoughts on “Will contracting continue to grow after IR35 reform?”

  1. BolshieBastard

    There will clearly be enlightened companies who will continue to engage contractors. But, I can think of many large organisations, particularly in the financial sector such as Lloyds, Barclays, Virgin Money etc who will simply not want the hassle and just decided everyone is ‘inside.’

  2. Eddy J

    Long term the impact is ludicrously expensive hire costs and limited flexible working with an overall lethargic work force for a post-Brexit UK in Europe.
    To compensate we’ll be recruiting skilled immigrants instead of paying for someone on the other side of the country their due relocation costs to support some sort of dynamism in the economy.

  3. mike

    Complete destruction of the contracting market. rates would have to go up by 50% to cover excess amounts of taxes and lack of being bale to claim for business equipment, mileage, hotel bills, etc. just another hit in the long list of things the government are doing to promote the destruction of the British people, first they tied us to the EU and imported millions of immigrants to cause wage suppression and fractured communities now law changes to oust more hard working brits that will be replaced by said immigrants working on the cheap.

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