IR35 reform: Status quo for most contractors will end on April 6th 2021 – survey

Most contractors will not keep working via their same size, one-person limited company as a direct consequence of private sector IR35 reform in just six months’ time, researchers say.

Facing the April reform, 18% plan to close their company, 17% could join a payroll, 6% will retire and 14% have ‘other plans,’ shows the study by Qdos and obtained by ContractorUK.  

Only 45% of contractors intend to keep contracting via their Personal Service Company (PSC) after April 6th 2021, versus the 55% for whom the status quo will end.

Although that 55% includes the 14% with ‘other plans,’ those plans were specified as setting up a completely ‘new business’ or ‘expanding their current’ company beyond its present size.

'Concerned'

“These statistics show how concerned contractors are about IR35 reform,” said Qdos’ CEO Seb Maley, referring to the 750-strong contractor study finding that most will change tack because of the IR35 revisions.

“But my message to independent workers is that you do not need to stop working this way.

“Thousands of organisations -- and counting -- recognise how important contractors are and will conduct fair [IR35] status determinations.”

'Unsure if my engager will get my IR35 status right'

But just four per cent of contractors trust their end-user to set IR35 status correctly. Twenty-one per cent are “unsure,” and 75% say they have no faith in the assessment being accurate.

“The narrative surrounding IR35 reform, which hasn’t been helped by the risk-averse approach to the changes taken by some high profile businesses, has contributed to contractors’ concerns,” said Mr Maley.

“We mustn't forget either that many contractors will not yet have had their IR35 status assessed by their client, following the 12-month delay.

“And there has been a cloud of uncertainty hanging over contractors for some time and until they start witnessing or experiencing fair status decisions, they may remain sceptical -- and understandably so.”

'Things will be different this time round'

According to the study, out of those contractors who said they expect to stop contracting next year, 75% said their decision “directly related” to the introduction of the April off-payroll rules.

And those with 'other' plans are "not necessarily" stopping contracting altogether.

“[We] believe things will be different this time round,” Qdos also claimed, referring to the participants likely basing their negative responses on the largely rushed assessments of pre-April 2020."

'Recruiters more aware'

Mr Maley added: “The private sector needed the [12-month] delay, especially when you take into account that for most firms it’s been all hands on deck to navigate COVID-19.

“Agencies [are now more aware that they] have an important role to play in IR35 reform. Not only will many of them become liable for IR35, as the fee-payer, but to continue to attract contractors to place, they too will benefit from encouraging end-clients to carry out well-informed IR35 decisions.”

Gathered by the status advisory in September 2020, other responses to the Qdos survey include the 93% who said working through a limited company was better than any other model of working.