A new survey carried out by YouGov on behalf of the Association of Independent Professionals and the Self-Employed (IPSE) has revealed the impact that IR35 rules have had on UK businesses since they were introduced in April 2021.
The research polled 500 UK businesses that engage contractors, with around half saying that they would have been unable to achieve the same growth level and outcomes without the use of contractors. However, 28 per cent said they have awarded fewer freelance contracts since IR35 rules came into force.
35 per cent of respondents agreed that it was now more difficult to attract freelancers since the introduction of the rules, a statement which 11 per cent of those surveyed said they strongly agreed with.
The IR35 rules, which were delayed from April 2020 due to the COVID-19 pandemic, meant that responsibility for determining contractor employment status moved from the contractors themselves to the client businesses that hired them.
The impact of this rule change on freelancers has been widely documented, with around a third leaving the self-employed workforce since, according to a past IPSE study. However, the new figures highlights the impact the rules have had on businesses that rely on freelancers, with 47 per cent in the new survey saying that IR35 compliance has become an administrative burden.
Commenting on the findings, IPSE CEO Derek Cribb said: “While the media, over the past year, has mainly analysed the significant and damaging impact of the reforms on self-employed workers, today’s research shows that the changes to off-payroll working have also hindered their clients.”
“Businesses have long relied on freelancers to provide additional expertise and support. The changes to IR35 in the private sector in April 2021 have made it harder for them to hire contractors and has therefore made it even more difficult for them to grow during these turbulent economic times.”
Cribb continued: “If the government wants to help companies recover post-pandemic, then it needs to start by rethinking IR35. Self-employed workers provide a valuable service for businesses and without a governmental review or further reform, companies will find they aren’t able to hire the necessary skills and talent that freelancers provide and that they are recovering at a slower pace compared to international competitors.”
Author: Steven English