‘Half of freelancers planning to stop contracting in the UK after IR35 reforms’

A new survey by IPSE shows half of freelancers are anticipating stopping contracting after April when controversial tax reforms become law.

Tax

tax form with callculator and glasses

Half of freelancers are planning to stop contracting in the UK after the changes to IR35 come into effect in April unless they can get contracts that are unaffected by the changes, according to new research.

The survey of survey of 3,841 freelancers by IPSE (the Association of Independent Professionals and the Self-Employed) found that nearly a quarter are planning to work abroad, 12% are thinking of stopping working altogether, 17% say they will be seeking an employed role and 11% say they will retire within the next year.

The total 50 per cent planning to stop contracting in the UK is up from nearly a third (32%) the same time last year when IPSE polled 3,841 freelancers. Nearly one in four contractors (24%) said their clients were either uncertain or had made no indication of what they would do in response to the IR35 changes – with less than two months to go before the legislation comes into effect in April. IR35 legislation was brought in to tackle so-called ‘disguised employment’ among the self-employed, but critics argue that the way it is being implemented will have widespread negative effects.

A quarter (24%) of those surveyed by IPSE said that their clients were planning to blanket-assess all their contractors as ‘inside IR35’ and one fifth (21%) will only engage contractors working through umbrella companies. Nearly one in 10 contractors (8%) even said their clients were planning to cease engaging contractors altogether.

IPSE is urging the government to delay the changes to IR35, warning that as one in four contractors’ clients are either uncertain or have not said what they will do about the changes, the sector is not ready for them – especially after the financial impact of the pandemic.

Andy Chamberlain, Director of Policy at IPSE, said: 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. This research shows that not only are a large proportion of businesses not ready for the changes: many others are responding by either ceasing to engage contractors altogether, or forcing them inside IR35 or into umbrella companies – both of which will slash their incomes.

“It is not surprising, therefore, that so many freelancers are reconsidering their prospects in the UK workforce – either planning to close their businesses or take them overseas. In recessions more than any other time, the UK needs its freelancers: their innovation and dynamism have historically always been the kickstarter to get the economy out of downturns.

“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.”

Dave Chaplin, CEO of contracting authority ContractorCalculator and IR35 Shield, added: “The behavioural effects of the so-called reforms are pushing work offshore, with firms hiring overseas workers rather than UK contractors to circumvent the rules, and thousands of the UK self-employed are quitting contracting for lower paid work.  Some firms have resorted to blanket banning limited company contractors and will see a considerable rise in their costs.  Others will see contractors walking out and projects damaged and delayed.  We will also see a proliferation of unregulated third party payroll schemes emerging, and many contractors will be unwittingly duped into non-compliant schemes, resulting in a second incarnation of the Loan Charge.”



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