Research from EY TaxChat has found the majority of the UK’s self-employed workforce is unprepared for the upcoming changes to the IR35 off-payroll working rules. The research, based on a poll of over 500 self-employed workers, found that only three per cent of self-employed individuals believe the forthcoming changes to the IR35 tax regime should go ahead in April, while 44 per cent think the Government should delay the changes, and 72 per cent of impacted contractors have not yet made any preparations ahead of the deadline.
Mark Lee, UK EY TaxChat Leader, said: “The implementation of the off-payroll working rules have been postponed once already, yet we are still in a position where many self-employed individuals appear to be in the dark. With the new rules coming into effect from early April, it is now a matter of urgency for those affected to understand how they may be impacted – not only form a tax perspective but in terms of earnings and cash flow.”
Many self-employed individuals are heading towards the 6th of April without the requisite knowledge of any potential impact the changes could have on their employment and earnings. Of those surveyed, more than a third (36 per cent) said they had not heard of the changes, while 31 per cent said they are aware but do not understand how they might impact them, and just 14 per cent claimed to be up to date with how it might affect them. Just over three in ten (31 per cent) respondents claim they will not be impacted at all.
Only 32 per cent of contractors have taken action so far, with most of those speaking to a tax adviser (11 per cent) or researching on the internet (11 per cent), 4 per cent having spoken to HMRC, a further 4 per cent having spoken to their clients (4 per cent), and just 2 per cent speaking to their recruitment agency.
When asked what emotion, if any, people associate with IR35, apathy lead the response (47 per cent), followed by confusion (27 per cent), anxiety (18 per cent) and stress (18 per cent). The cause of negative emotion is likely driven by the impact the changes will have on workers’ incomes, with 17 per cent saying it will decrease their income.
Commenting on these findings, Dave Chaplin CEO of ContractorCalculator and IR35 Shield said: “It is indeed surprising that firms and individuals, having been given a further year to prepare for the reforms, which were made law in July 2020, are still not ready. We are aware of large numbers of firms who just never got around to it and have a misguided view that the Chancellor is going to roll back Primary Legislation that is already enacted. That’s not going to happen.
“The alarm bell was sounded 2 years ago, and not hearing it or deciding to pretend it didn’t happen is hardly the Government’s fault,” he added. “The Treasury is used to being asked for delays to legislation, because there are always those who leave things to the last minute.
“HMRC has been spoon feeding everyone guidance for a year now, as have the rest of us,” he concluded.