85% of Companies Will Cut IT Contractor Numbers After IR35 Changes – Poll

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Government IR35 Rules - IR35 Compliance
Government IR35 Rules - IR35 Compliance

Contractor Numbers After IR35

A survey by Brookson Legal shows that 85% of companies plan to cut contractor numbers after IR35 changes come into effect. They come into effect in April 2020. However, some companies intend to take action on the hiring of IT Contractors well before then. Indeed HSBC plan to stop hiring contractors completely after September 2019. Morgan Stanley plan to stop hiring contractors from October 2019.

Companies Considering Blanket Ban on IT Contractor Numbers After IR35

Altogether 59% of companies say that they are considering having a blanket ban on the use of contractors. If all, or even many, of those go ahead with this that will be highly devastating to the contractor profession.

If 85% of companies either cut contractors completely or just cut IT Contractor numbers that will have a devastating effect on UK IT contractors.

This could lead to the biggest crisis in the IT contracting industry ever. It may be even greater than when IR35 was first introduced in 1999. Contractor numbers after IR35 implementation in the private sector will be much, much lower.

IT Contractor Rates Will Plunge

With many fewer IT contractor jobs about and the same number of IT Contractors, contract rates would be likely to tumble. It’s the economic laws of Supply and Demand. If the supply stays the same of a commodity or service and the Demand falls then the price will fall too.

Also, contractors still working would lose between 20% and 25% of their income in extra taxes and national insurance contributions. This truly would be Armageddon in the IT contracting profession.

Contractors wouldn’t disappear entirely but contractor numbers after IR35 would be drastically reduced and their rates would be drastically lower. And they would pay much more in tax.

Conservatives Attack on IT Contractors

This is all because Theresa May and Philip Hammond, advised by the big consultancies, said that ‘it is an unfair anomaly that self employed people earning 100,000 pounds a year pay less tax than a permanent employee earning 100,000 pounds a year’.

So, they are going to completely disrupt the freelance industry and the way companies hire a flexible workforce in order to fix this ‘unfair anomaly’.

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