IR35 Crisis Deepens
The IR35 crisis brought on by the Government is just getting deeper and deeper. The Government and HMRC believed that contractors would just take the IR35 reforms meekly and just pay PAYE tax like employees – but without any employee benefits.
Companies obviously believed that when they blanket banned PSC contractors that they would just roll over and accept the new PAYE contracts.
How wrong all of them are.
Contractors Questions on IR35 Crisis
- How many contractors will refuse to take inside IR35 contracts?
- Who cuts most of the code at UK companies?
- How will the looming IR35 crisis affect the UK’s major companies?
- Why will companies in the banking and financial sectors be hit even harder?
- How will the IR35 crisis affect the flexible workforce?
How many contractors will refuse to take inside IR35 contracts
According to a survey by freelancers group IPSE of their members, half of all contractors (50%) will only take contracts that are outside IR35.
That will mean a massive shake up among companies up and down the land. Contractors tend to the grunt work, e.g. the coding that permanent employees don’t want to do after they get a couple of years experience behind them. The permanent employees want promotion into supervisory roles after that.
Who cuts most of the code at UK companies
It’s a pretty scary fact that most of the code cut in companies is done by permanent employees with less than 18 months experience.
That’s excluding those companies smart enough to take on contractors, many of whom have more than 10 years experience in coding. They are basically doing the grunt work that permanent employees of a couple of years experience would turn up their noses at.
Now, half of hose contractors are going to up and leave companies who are imposing blanket bans on contractors using personal services companies.
This IR35 crisis will just worsen as we get towards the April 6th implementation date for the IR35 reforms.
How will the looming IR35 crisis affect the UK’s major companies
The effect will be much greater than that of the millennium bug.
Half of all of those doing the grunt work are going to tell their client companies that they are not going to go PAYE.
There will be a massive effect on the crucial IT systems which those freelancers are taking a huge part in.
Companies will lose out as their foreign rivals are able to get the software component of their new services and products to market before their UK rivals. They may even enlist the help of those contractors walking out of UK companies.
Why will companies the the banking and financial sectors be hit even harder
Those companies in the financial sector will struggle to get their crucial regulatory systems done on time.
The major banks may not be able to get their LIBOR decommissioning systems in place for the December 2021 deadline. That would be catastrophic with trillions of dollars involved here.
And this is all to get an amount of tax in which is worth less than a tenth of a penny on income tax.
How will the IR35 crisis affect the flexible workforce
The Government constantly praise the flexible workforce despite taking active measures to destroy that market and make it much less flexible.
Let’s hope Boris Johnson and Sajid Javid see the error of their ways before it is too late.
But the clock is ticking down on this looming IR35 crisis.
Said Andy Chamberlain of freelancers group IPSE:-
“The government must urgently delay the changes while a full and independent review is carried out. If it pushes ahead regardless, it will do untold damage to freelancers, the businesses that rely on them and the wider economy.”
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