IR35 Contractor Market Disaster as Only 15% Test Outside IR35

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How much hope is there for the post IR35 contractor market
How much hope is there for the post IR35 contractor market

IR35 Contractor Market

The IR35 contractor market has been turned upside down by survey news from OffPayroll.org that only 15% of contractors have tested outside IR35.

When the Government announced that they would implement the IR35 reforms in the private sector, HMRC said that they expected that 66% would test outside.

Questions on IR35 Contractor Market

  1. How many contractors should pass HMRC’s IR35 test?
  2. Why is blanket banning a disaster for contractors?
  3. Will the IR35 reforms destroy the IR35 contractor market?
  4. Why do so many companies who happily used contractors before now see them as tax avoiders?
  5. Why do they want to destroy the successful IR35 contractor market?
  6. Where is this opinion of contractors as tax avoiders coming from?
  7. How much hope is there for the post IR35 contractor market?

How many contractors should pass HMRC’s IR35 test

In over a million tests using HMRC’s Check Employment Status for Tax IR35 test, 54% of contractors have tested outside IR35. 31% tested inside and 15% were indeterminable.

Yet when companies are testing them only 15% are testing their contractors outside IR35.

And this 15% won’t include those working at companies who are not testing at all. Many of these are simply refusing to use personal services company contractors at all in the future.

Why is blanket banning a disaster for contractors

Indeed, most of our big companies, including all of our major banks are blanket banning PSC contractors.

The blanket banning of PSC contractors and the low numbers of those testing outside IR35 is a complete disaster both for contractors and those companies who use them.

Will the IR35 reforms destroy the IR35 contractor market

Companies were able to take advantage of an excellent flexible workforce. They used what they believed to be the optimum mix of contractors and permanent employees.

Now, because of Government and HMRC interference in what was a market working optimally, most of the UK’s companies are having to change the way they operate.

Indeed many companies are scrapping the use of contractors completely. Others are forcing them to become Fixed Term PAYE off payroll workers.

Many people at those companies who were previously envious of the money contractors earned are using this opportunity to stick the boot in.

Why do so many companies who happily used contractors before now see them as tax avoiders

“Contractors are all tax avoiders” one contractor was told by a senior manager.

That’s strange because that is reminiscent of what HMRC are saying. Both they and ‘gone native’ Treasury Minister Jesse Norman said that in this area (IR35) “there is only 10% compliance”.

It seems that there are full time HMRC advisors in at the top 2,000 of the UK’s top companies. So, is it any wonder that companies and senior management there are starting to ape the Government / HMRC line?

Why do they want to destroy the successful IR35 contractor market

Do the Government and HMRC not realise that they are about to do huge damage to the UK economy? This freelance market was working very well – till Government interference. And this market interference comes from a party who are supposed to be the party of business.

As well as that, new Chancellor Rishi Sunak has bought the line that all freelancers are tax avoiders. How did the Government and HMRC go from believing that 66% of contractors would pass their IR35 test to believing that there was only 10% compliance in this area?

Where is this opinion of contractors as tax avoiders coming from

Could this advice be coming from the big IT consultancies who infect both the Government and the UK’s top businesses?

They have always looked upon contractors as rivals in the marketplace.

They would much rather that companies pay £1,500 day for a new graduate than they pay £500 a day for contractor with 10 years experience across many companies.

How much hope is there for the post IR35 contractor market

Is there any hope for a functioning post IR35 contractor market future? It’s very hard to see it.

Contractors are being stitched up good and proper by all the other players in the marketplace. And all the UK’s top companies will suffer because of it – as will UK Plc.

For all critical IR35 news and advice for contractors click on IR35 News.

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    3 COMMENTS

    1. As an accountant with several clients who are affected by this change it seems the bigger the company the quicker they have moved to remove contractors in a blanket ban! Also interestingly the MOD are now taking a few contractors back on but with defined deliverables, let’s see how that pans out.

    2. What a lot of nonsense , very simple , it’s tax avoidance , plenty of work but as PAYE, just be grateful tax man hasn’t looked back , you all know what you are doing , I’m limited but it’s a fiddle

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