According to recent research, freelance workers are increasingly declining jobs that would subject them to the controversial tax rule changes, known as IR35. This change, which has been in effect since April 2021, shifted the responsibility of determining whether freelancers working in the private sector should be classified as self-employed for tax purposes (“outside IR35”) or employed for tax purposes, to their employers. A crackdown on so-called “disguised employees”, who bill for their services through limited companies, has led to these changes. Instead of paying income tax and national insurance, these individuals pay lower corporate and dividend taxes that hide their true employment status.
The new IR35 rule changes have made it difficult for both individuals and hiring businesses to determine employment status. A recent survey of 1,500 highly-skilled contractors by IPSE, the Association of Independent Professionals and the Self-Employed, revealed that individuals are increasingly avoiding working under these rule changes. More than 53% said they had rejected work in the past 12 months because the job was deemed “inside IR35”, compared to just 31% in the previous survey. Furthermore, 62% claimed to only work on engagements that are classified as outside IR35 in the coming year, compared to 55% in the previous survey.
In response to the IR35 rule changes, 22% of contractors plan to seek work abroad, as overseas businesses are not affected by these changes. Additionally, 29% intend to work with small businesses, which are exempt from the rules that only apply to larger businesses. According to Andy Chamberlain, Director of Policy at IPSE, these figures are a “damning legacy for a government which has prioritized labor market participation”. Freelancers and contractors are refusing to be corralled on to company payrolls but instead are working with firms that respect their status as independent businesses, both at home and abroad.
The survey also revealed that contractors who accepted work advertised as outside IR35 are increasingly being asked by their hirers to sign contracts indemnifying them in case of a tax investigation, with nearly a quarter (24%) of the survey respondents having been required to agree to such a clause. Chamberlain has stated that the growing prevalence of these clauses in contractor engagements is a concerning sign that HM Revenue & Customs’ reforms have reallocated IR35 liabilities rather than address the issue at hand.
The Treasury, however, stated that the underlying rules on off-payroll working have remained unchanged – anyone working like an employee should pay similar taxes to someone directly employed. The government aims to continue supporting individuals and employers operating under these rules while focusing on understanding the impact of these reforms.
If you are a consultant affected by these rule changes, the Financial Times would like to hear from you. They are conducting a survey to better understand the working conditions of consultants during this period of change.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
