The majority of contractors see the UK’s IR35 changes to the way employment status is judged as the biggest threat to their business in 2022, according to recent research.
A survey of more than 1,200 contractors by IR35 insurance provider Qdos shows that 61 per cent see the rule changes as the “biggest threat” to the contracting business model, which is said to be worth more than £300bn annually to the economy, according to the IPSE, the contractors, consultants and interims association.
Qdos found this was more than 10 times the number of contractors most concerned about the impact of coronavirus (6 per cent) or Brexit (6 per cent). Incoming dividend tax increases (18 per cent) were earmarked as the second biggest threat, although only a third of folk surveyed were concerned about those changes.
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The introduction of IR35 reform to the private sector on 6 April 2021 saw the responsibility for assessing IR35 status shift from the contractor to the medium or large business engaging them. As part of this reform, which mirrors changes introduced in the public sector in 2017, the liability also shifted, from the contractor to the fee-paying party in the supply chain (either the recruitment agency or client).
Qdos CEO Seb Maley said: “IR35 reform has created a plethora of challenges for contractors, jeopardising this way of working for thousands. The fact that contractors still see IR35 as the stand-out threat in 2022 – and by some distance – tells you everything you need to know about the journey ahead, along with the progress that needs to be made this year.
“Not only will this see businesses struggle to attract the flexible talent they need to recover from the pandemic, but forcing genuinely self-employed people onto the payroll will also result in significant and needless cost rises.”
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Qdos’s research found that 39 per cent were “confident” about their prospects for 2022. However, 37 per cent were either “concerned” or “very concerned.” There was an 83 per cent rise in contractors deemed outside IR35 by their clients from April to November 2021.
Even the government’s own departments are having trouble with IR35. In December it was revealed that guidance from Her Majesty’s Revenue & Customs’ employment checker tool had led to wrong calls on the tax status of freelance workers, costing £120m across two Whitehall departments.
Financial reports from the Ministry of Justice and the Department for Environment, Food and Rural Affairs show they face combined additional tax bills of at least £121m due to incorrectly determining the status of their contractors, despite following HMRC’s “accompanying guidance” and using HMRC’s Check Employment Status for Tax (CEST) tool.
IPSE research from October 2021 found 35 per cent of contractors in the UK had become permanent employees, retired, shifted to work overseas or are “simply not working” since IR35 tax legislation was revised in April 2021.
By Lindsay Clark
Source: The Register
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