Half Of The UK’s Freelancers Say They’ll Cease Contracting Once IR35 Reform Take

Posted by Liz Seyi on April 22nd, 2021

In another development that will be of little surprise to workers taking advantage of our own accountancy for contractors in Plymouth and Wellington, a new survey has revealed that half (50%) of contractors plan to stop contracting in the UK after IR35 rule changes are introduced in April. 

The UK government’s reforms of the off-payroll working rules – also known as IR35 – are, in the words of HM Revenue & Customs (HMRC), “designed to ensure individuals working like employees but through their own limited company, or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed.” 

The new rules on how some contractors pay tax will take effect from 6th April 2021. However, it is clear from many recent polls that the reform continues to be fiercely opposed by a high proportion of the contractors themselves. 

Indeed, we recently reported here at TS Partners that according to other research, 44% of self-employed people questioned were of the view that the IR35 changes should be delayed, with only 3% in favour of them going ahead as planned in April. 

Signs of serious changes to contractors’ career approaches 

Now, according to the findings of new research by the Association of Independent Professionals and the Self-Employed (IPSE), half of freelancers are set to cease their contracting activities in the UK, unless they can get contracts unaffected by the reform. As an alternative, they intended to look for contracts abroad (24%), look for an employed role (17%), stop working altogether (12%), or retire within the coming year (11%). 

That headline 50% figure of would-be contracting quitters compares with a 32% equivalent figure at the same time in 2020, which was when the legislation was initially set to be implemented. This indicates the sheer extent to which freelancers’ worries have been amplified by the pandemic. 

Almost a quarter (24%) of the contractors questioned said their clients were either uncertain or had not yet indicated how they would respond to the off-payroll reforms, even with less than two months to go until their introduction. 

Meanwhile, 24% of respondents said their clients intended to blanket-assess all of their contractors as ‘inside IR35’, and 21% stated that their clients would only engage contractors working through umbrella companies. Nearly a tenth (10%) of contractors claimed their clients were even looking to entirely stop working with contractors. 

IPSE warns that the new IR35 rules “would undermine this vital sector” 

In the wake of these findings showing a sustained high degree of uncertainty as to how contractors’ clients will approach the new IR35 rules, IPSE urged the government to delay the changes, reasoning that “the sector is clearly not ready for them – especially after the financial impact of the pandemic.”

IPSE policy director Andy Chamberlain commented in response to the survey findings: “The pandemic has done disproportionate financial damage to the self-employed sector; after this, it simply cannot take the added hit of the changes to IR35… it is not surprising, therefore, that so many freelancers are reconsidering their prospects in the UK workforce”. 

He added: “Pushing ahead with the IR35 changes now would undermine this vital sector just when the UK economy needs it most. Therefore, for freelancers, the businesses that engage them and for the UK economy, we are urging the government to delay and rethink the changes to IR35.”

To discover more about how our specialist accountancy for contractors in Plymouth and Wellington can assist you with negotiating the challenges posed by the looming change to off-payroll working rules, please don’t hesitate to reach out to our professional and friendly team.