A new survey has revealed the impact IR35 has had on freelancers, with a sharp increase in contractors working through umbrella companies. Umbrella company Cool Company, which commissioned the research, revealed that its users have risen by 811 per cent and its invoices processed by 1,000 per cent over the past year.
The study surveyed 500 freelancers in the UK, with 47 per cent saying that they were paid by an umbrella company and 37 per cent of that group saying that they joined their umbrella company as a result of IR35, which came into force for companies in the private sector in April 2021.
33 per cent of those surveyed were paid via PAYE through a limited company they owned. 20 per cent revealed that they were paid mainly through dividends, highlighting concerns about how the government’s recent 1.25 per cent dividend tax increase might impact freelancers.
Regarding how IR35 has affected their profession, 54 per cent said that they felt clients were not willing to engage with the system, due to the complexity of the process. 46 per cent said clients seemed to be more hesitant to use contractors since the rules came in, while 48 per cent revealed clients had not offered any increase to bill or pay rates.
Kris Simpson, Head of B2C at Cool Company, commented: “Since the introduction of IR35 in April 2021, there has been a rapid increase in the number of contractors and freelancers turning to umbrella companies to avoid red tape.”
“Between August 2020 and August 2021, the number of sent invoices processed through Cool Company increased by 1,000 per cent. That’s a significant figure for any business. But while it’s positive for us, it does highlight the fact that many contract and freelance workers have had to find new workarounds to deal with the new legislation.”
Simpson added, however, that the survey had revealed some positives, with the majority (78 per cent) saying they had secured more work. 64 per cent of respondents, meanwhile, said that they were earning more.
Author: Steven English