In the wake of the recent update from The Financial Times, the evolving landscape of the recruitment sector continues to be shaped by the far-reaching consequences of the controversial IR35 reforms.
A new survey of more than 900 contractors published showed that many workers remain dissatisfied with the changes to the tax rules for freelance workers in the private sector, and has found that nearly half of the UK’s freelancers believe they have been misclassified as “employed for tax purposes” by their hiring companies.
Nearly half of contractors surveyed express dissatisfaction, believing they have been wrongly classified as “employed for tax purposes” by their hiring companies. This sentiment underscores the challenges and complexities faced by both freelancers and hirers in adapting to the new rules, implemented in the private sector since April 2021.
The Shift of Responsibility after IR35 Reforms:
The transition of decision-making regarding the employment status of freelancers from contractors to their hirers marked a pivotal moment in the implementation of IR35 reforms. This significant shift places the final responsibility for paying the right tax squarely on the shoulders of the hiring companies. However, the survey reveals that 43% of respondents feel they have faced blanket determinations of their IR35 status, irrespective of their actual employment status.
The Current Landscape:
Seb Maley, Chief Executive of Qdos, highlights the ongoing challenges faced by contractors, emphasising that some hiring companies have adapted well to the complex rules, while others have chosen a more risk-averse approach, particularly in the financial services sector. The reluctance of certain companies to hire contractors working through limited companies has added to the complexities faced by freelancers.
Political Support and Dissatisfaction around IR35 reforms:
The dissatisfaction expressed by contractors extends beyond their classification woes. The survey indicates that 63% of respondents believe none of the major political parties adequately represents their interests. With only 11% supporting the Conservative party and 9% favoring the Labour party, it’s evident that there’s a significant gap in political alignment with the freelance workforce.
IR35 Reversal a Priority:
The survey highlights that 68% of contractors see the reversal of IR35 reforms as their top priority, emphasising the urgency and importance attached to this issue. This far outweighs other concerns, such as the recent increase in corporation tax, selected by only 19% of respondents. The desire to see a reversal of IR35 reforms signals the magnitude of impact and discontent within the freelance community.
Government Tax Policy as a Detriment:
In a related report, IPSE found that 68% of freelancers cited government tax policy as a detrimental factor affecting their business performance. This aligns with the challenges faced by freelancers who, as Andy Chamberlain, Director of Policy at IPSE, notes, are often forced to accept disagreeable client assessments to secure contracts or walk away.
The persistent challenges faced by contractors in navigating the intricacies of IR35 reforms underscore the need for continued dialogue and adaptation within the recruitment sector. As freelancers seek to assert their true employment status and hiring companies grapple with compliance, it is evident that the impact of these reforms reverberates throughout the industry. The call for a reversal of IR35 reforms remains a dominant voice, emphasising the urgency for stakeholders to address the concerns and collectively shape a more equitable future for the freelance workforce.
If you are still trying to navigate the complexities of IR35, don’t hesitate to get in touch with our team of experts today.
IR35 Reforms FAQs
Should I be concerned by IR35 reforms?
Many contractors express dissatisfaction with being classified as “employed for tax purposes” by their hiring companies, with nearly half feeling they have been wrongly classified. This reflects the challenges faced by freelancers and hirers in adapting to the changes brought about by IR35 reforms.
How has the responsibility shifted in light of IR35 reforms?
The responsibility for determining the employment status of freelancers has shifted from contractors to their hiring companies, placing the burden of paying the correct tax squarely on the shoulders of the hirers. However, the survey indicates that 43% of respondents feel they have faced blanket determinations of their IR35 status, regardless of their actual employment status.
What is the most pressing issue related to IR35 reforms?
The survey reveals that 68% of contractors consider the reversal of IR35 reforms as their top priority, signaling the urgency and importance attached to this issue. This far surpasses concerns about other policy changes, such as the recent increase in corporation tax, selected by only 19% of respondents.
How do government tax policies impact freelancers?
Government tax policies, according to 68% of freelancers surveyed by IPSE, are cited as a detrimental factor affecting their business performance. This reflects the challenges faced by freelancers who often feel compelled to accept unfavorable client assessments to secure contracts or opt to walk away.
