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It’s been almost three months since the IR35 reform was introduced in the private sector, which saw medium and large businesses take responsibility for determining the IR35 status of contractors. With liability shifting from the contractor to the fee-paying party in the supply chain, blanket bans started to be imposed on personal service companies, aka limited company contractors.
Such action led to industry concern about the future of contracting and whether it could continue in its current form. In March, the Association of Independent Professionals and the Self-Employed (IPSE) surveyed 1,500 of its 16,000 members to gauge their thoughts on the reform. It found that 24% of respondents were planning to seek contracts abroad, 17% would look for an employed role, and 12% had plans to stop working altogether.
How’s it going?
Recent research from IR35 expert Qdos revealed that over a third (35%) of 1,850 contractors surveyed had been assessed as outside of IR35. While this means 65% were found to be inside, it’s expected that the number of contractors outside will start to increase after the initial “feeling out” period.
When it came to determining status, 38% of contractors had their status set by HMRC’s IR35 Check Employment Status for Tax (CEST) tool, with 25% using an independent specialist to make the determination. It’s no secret that CEST has been widely criticised due to its inability to provide a response for certain circumstances. However, with HMRC confirming it will stand by CEST results, the tool must continue to be used to demonstrate reasonable care has been taken.
The research also revealed that 65.5% of contractors are either not very confident or not confident at all that businesses would be able to manage the IR35 reform. And they’re not prepared to take it lying down, with 39% stating they will challenge their client’s IR35 decisions and a further 11% saying they would consider challenging a classification.
Does this signify potential ruptures in the client/contractor relationship? Potentially. Especially as the Qdos findings also highlighted that only 56% of those assessed are sure they received a Status Determination Statement (SDS) from their client, despite it being a legal requirement.
Despite the IR35 reform being rolled out in the public sector back in 2017 and the private sector granted an additional year to prepare due to the Covid-19 pandemic, it’s clear there’s still a lot of work to be done to garner confidence for organisations and contractors alike. CEO of Qdos Seb Maley summed it up best when he said: “Firms need to remember that preparing for IR35 reform was phase one. Phase two – which we have now entered – is ensuring compliance going forward.”
Need some help?
Our team at NWM are experts in IR35 and other relevant legislation, ensuring you remain informed and always on the right side of the law. If you’re a contractor and have any questions or want to find out more, contact the team on 0330 333 4240 or email email@example.com.