IR35 12 Months On – Cool Company
Cool Company has revealed new research that looks at the knock-on effects of the new legislation regarding IR35, twelve months after the reform. Although some improvement has been made, it still appears that a large portion of UK contractors are considering leaving their profession.
12 months of IR35
It was originally found that eight out of ten contractors believed that the only way to navigate the changing legislation was to leave their profession. There has been a slight shift in this thinking, with the numbers falling to 41% of contractors, which is largely due to businesses and contractors making adjustments to the ways they work.
The IR35 reform was introduced in April 2021 and was implemented to give HMRC more control over potential tax avoidance within the contractor market pool. The key shift lay with terminology; businesses had to make sure that contractors hired could not be legally classified as employees.
This definition alone caused much confusion, with many businesses opting to stop contract working due to the time-consuming nature of fully understanding and complying with the IR35 legislation.
Despite some initial disruption, Cool Company has seen a more levelled and positive response from contractors in recent research with 39% of contractors no longer looking at the option of leaving their profession and 21% ruling it out as never an option.
The overall experience received from contractors regarding the first 12 months of IR35 reform was positive for 37% of individuals and 20% claiming a negative experience.
The largest turning point for many contractors has been adapting to the reform by finding new ways and methods of working. 70% of contractors have considered using an umbrella company to avoid running into difficulties with the IR35, whilst only 30% have pursued this.
Kris Simpson, Cool Company’s Head of B2C Business UK, comments:
While it is obvious that IR35 is continuing to affect the working lives of contractors and the businesses they serve, it is encouraging to find that the impact hasn’t been as devastating as originally predicted. Although almost half of all contractors are still clearly experiencing a difficult time.
Finding new ways to provide their services is the key for contractor success. This might be changing their client base, so that they work only with the smaller businesses not covered by IR35. Working with overseas clients, beyond the reach of the legislation. Or finding clients through an umbrella company.
With contract workers playing such an important role within the UK’s economy – 980,000 1 temporary workers on assignment every day during 2020 – it is integral that we find ways for them to thrive while adhering to IR35. So, perhaps more help needs to be given to the 41% of contractors still considering leaving their profession.
It’s clear that improvement has been made for contractors in how they view and engage with new IR35 reform, but there’s definite work to be done in demonstrating how these contractors can find the necessary support to help them remain in their chosen profession.