‘94% of contractors would avoid contracts placing them inside IR35’

employee using calculator

The franchise agreement contract covering parties, the grant, territory and term

A huge majority of contractors would avoid contracts that put them inside IR35 legislation and would consider legal action to secure employment rights if they were deemed employed for tax purposes, according to a poll by ContractorCalcultor.

The poll of over 2,000 public and private sector contractors comes as the Government is considering whether to roll out IR35 legislation to private business. IR35 is tax legislation aimed at countering tax avoidance by those contractors deemed to be involved in ‘disguised employment‘.

ContractorCalculator says increasing costs, shrinking talent pools, reduced flexibility and legal challenges to status assessments are among the hurdles that firms will have to navigate if the Off-Payroll tax reaches the private sector.

The poll shows 94% of contractors would avoid contracts placing them ‘inside IR35’ and 25% would never take a contract ‘inside IR35’; 73% would only accept ‘inside IR35’ contracts with a significant rate rise; and 63% said they would demand a rate increase if travel was required.

Other findings include:

  • 54% would work less each year rather than take on ‘inside IR35’ work
  • 23% would quit contracting altogether
  • 94% believe those deemed ‘employed for tax purposes’ should automatically receive employment rights. 89% would consider legal action to secure rights
  • 79% do not consider HMRC’s CEST tool to be accurate.
  • 48% will not vote for an MP who supports these tax reforms

Dave Chaplin, CEO and founder of ContractorCalculator said: “We’re 15 months in since the Off-Payroll legislation hit our public services and organisations across the public sector have failed to compromise on their approach to the tax legislation and are suffering intensified skills shortages as a result. If private sector firms follow suit, they could suffer an identical fate.

“As our survey shows, an expansion of the new tax into the private sector alone threatens to deprive the UK labour market of much of its flexibility and it will cost them, both in monetary terms as well as in talent and skills terms with 94% of contractors avoiding ‘inside IR35’ work.  Our findings paint a bleak picture of things to come if Government chooses to roll out the new off-payroll tax to the private sector. It will be devastating for UK plc and the UK economy overall.”

When asked what rights they believe they should be afforded if deemed ‘employed for tax purposes’, 92% highlighted sick pay, 74% want maternity pay and 81% want grievance/disciplinary protection.  Just 6% claimed they wouldn’t want any form of rights.

Moreover, when asked whether they would vote for their local MP at the next election, if their MP were to support the new Off-Payroll tax, 49% of contractors said no.

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