Survey: Most contractors will move on from limited company when IR35 comes in.
According to a study of 750 contractors by Qdos, most contractors plan to stop working via their one-person limited companies. The results of the 750-strong contractor survey come ahead of private sector IR35 reforms due to come into effect on April 6 2021.
With reforms looming, 18 per cent of those surveyed said they plan to close their limited company, 17 per cent say they may join a payroll, while 6 per cent say they will retire. 14 per cent say they have “other plans”, such as setting up a new business or expanding their current company.
All in all, this totals 55 per cent of respondents for whom the status quo of limited company contracting will end. The remaining 45 per cent plan to continue working through their Personal Service Company (PSC) once the rules come into force.
Of contractors who say they plan to stop contracting, 75 per cent said their decision was “directly related” to the introduction of the new rules in April next year. Overall, 93 per cent of respondents said that working via a PSC was better than any other working model.
Qdos CEO Seb Maley commented: “These statistics show how concerned contractors are about IR35 reform. 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 status determinations.”
However, the study showed a broad mistrust among contractors that end-users will correctly set IR35 status. 75 per cent say they have no faith that assessments will be accurate, while 21 per cent say they are “unsure”.
Discussing this, Maley asserted: “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.”
“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.”
Maley also added that he thought many participants in the survey may have been basing negative responses on the rushed assessments that lead up to the initial launch date in April 2020, which was delayed due to COVID-19. Maley said that Qdos “believe things will be different this time round.”
“The private sector needed the delay, especially when you take into account that for most firms it’s been all hands on deck to navigate COVID-19”, Maley added.
“Agencies [are now more aware 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.”
Author: Steven English