IR35 expert, Qdos, has carried out extensive research into the initial impact of the introduction of IR35 reform in the private sector on 6th April. The exclusive insight, carried out among 1846 UK contractors affected by changes to IR35, serves as a stark reminder to businesses about the work that still must be done to ensure compliance and retain contractors.
The research also signals that contracting outside IR35 has not been wiped out by the reform, with one-third of contractors assessed as outside IR35 – a figure that Qdos expects to increase as the ‘dust settles’ on the changes.
In April, following IR35 reform, medium and large businesses became responsible for determining the IR35 status of contractors. The liability shifted from the contractor to the fee-paying party in the supply chain. These changes mirror public sector reform enforced in 2017.
Qdos’ research discovered:
- Two-thirds of contractors (65 per cent) have been assessed inside IR35, one-third outside (35 per cent).
- Half of contractors may challenge client’s IR35 decisions (39 per cent will, 11 per cent might).
- Only half (56 per cent) of those assessed are sure they have received a Status Determination Statement (SDS) from their client, despite this being a legal requirement under the reform.
- The biggest group (38 per cent) of contractors had their status set via CEST (HMRC’s IR35 tool), with 25 per cent having had an independent specialist (such as Qdos) decide their status. Just 4 per cent had their IR35 position decided by a third-party automated IR35 tool/technology.
- 5 per cent of contractors are either not very confident (40.2 per cent) or not at all (25.3 per cent) confident that businesses will be able to manage IR35 reform.
- Nearly two in three (64 per cent) of contractors were told by their clients they can/must work via an umbrella company (where IR35 doesn’t apply).
“I’m not surprised that there’s clearly still work to be done and contractors aren’t convinced that reform is manageable,” said Qdos CEO Seb Maley, “but even so, whichever way you look at it, contracting isn’t dead – nor will IR35 reform spell the end to working in this way. And I’ve no doubt that as the dust settles, more businesses will get to grips with the changes, reverse needless contractor bans and compliantly engage contractors outside IR35.
“Reform has landed but that doesn’t mean it’s job done for businesses,” Male added. “Half of contractors might challenge their IR35 assessment, while a similar number aren’t sure if their client has provided them with a Status Determination Statement despite it being a legal requirement. Firms need to remember, preparing for IR35 reform was phase one. Phase two – which we have now entered – is ensuring compliance going forward.”
