IR35 changes have driven many self-employed out of sector

Due to the IR35 changes earlier this year, 35% of contractors have chosen to leave the sector to either stop working, move into permanent employment, work overseas or retire.

As a result of these findings, the Association of Independent Professionals and the Self-Employed (IPSE) are urging the government to clear up the mess caused by the changes.

According to the IPSE report, of the contractors who have remained working in the sector, as many as 80% who are deemed ‘inside’ IR35 said that their quarterly earnings dropped by an average of 30%.

Worryingly, 21% of the contractors questioned said that their clients had taken on a blanket assessment approach to their contracts.

Andy Chamberlain, Director of Policy at IPSE, commented, “Contractors are the most productive part of the crucial self-employed sector, which overall contributes more than £300bn to the UK economy every year. Not only that: they are absolutely vital for economic recovery, providing invaluable flexible skills to businesses getting back on their feet and adapting. But just when this sector is needed most, it has been hamstrung by the changes to IR35.”

Chamberlain added, “Not only have the changes to IR35 driven large parts of the contracting sector out of self-employment: they have made things needlessly and enormously more complex for those who remain. Contractors now find themselves with myriad different and complex ways of working – each with its own pitfalls. They are now divided between those still managing to work outside IR35, those working through unregulated – and sometimes unscrupulous – umbrella companies, those working inside IR35 for less pay and with no rights, and others now on client or agency payrolls.

“There is one word and one word only for this situation: a mess. Now, government must clear it up. We are urging government to review the situation in the contracting sector and be open to radical steps based on that – including, if necessary, repealing the changes altogether. Government must also urgently set out detailed regulations for how umbrella companies should operate and also work to clear the confusion across self-employment by clarifying when it is right for people to operate as sole traders, employees or limited companies.

“We are keen to work with government on this, but, as this research shows, it must take this seriously: it must recognise the mess the changes to IR35 have created and work to get a grip on the situation.”

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.