One-in-Five Sole Traders Needlessly Preparing for IR35 Reforms

One-in-Five Sole Traders Needlessly Preparing for IR35 Reforms

10 June 2019

New research indicates that one-in-five UK sole traders are preparing for the upcoming changes to off-payroll working rules in the private sector, despite the fact that the legislation will not affect them.

Completed by the Freelancer & Contractor Services Association (FCSA) professional body and cloud accounting software provider FreeAgent, the research found that 18% of sole traders were making preparations for the new rules when they would not affect their business type.

The survey also showed that 13% of limited company contractors said that they would stop contracting as a result of the reforms. If true, this would mean an estimated 78,000 contractors would leave the flexible workforce, making it harder for medium and large businesses to recruit temporary workers.

Other findings include:

  • 70% of limited company contractors believe that the proposals are unfair to self-employed people.
  • 68% think that all and 8% think that some employment rights should be given to contractors deemed to be inside IR35.
  • 36% will only work ‘outside IR35’ contracts

Under the changes, a private sector organisation will be responsible for judging a limited company contractor’s IR35 position from April 2020.

Currently, this responsibility lies with the contractor. When similar rules were introduced in the public sector in 2017, many more contractors were deemed ‘inside IR35’ and forced to pay income tax and National Insurance as if they were employees, while not receiving any of the rights and other benefits that come with employment.

But the off-payroll working rule change will not affect certain contractors. Sole traders that don’t operate through a limited company, contractors working for smaller organisations and contractors that work through an umbrella company can continue contracting as normal.

Julia Kermode, chief executive of the FCSA said: “The fact that our research points to 18% of sole-traders who are making plans for the 2020 roll out of the reforms when they do not apply to them speaks volumes about the lack of clarity regarding the reforms.”

Miles Grady, director of Umbrella.co.uk said: “This research shows that the vast majority of contractors are unhappy with the changes to off-payroll working rules. With unemployment low, even a small change in the size of Britain’s highly skilled temporary workforce could make life significantly harder for firms that need flexible workers to see through projects and grow.

“Many contractors will need to think carefully about their position from 2020. Many would be wise to pursue an alternate contracting arrangement, such as contracting through an umbrella company.”

For personalised advice on how the IR35 reforms will affect you, speak to a member of our accounts team today. Call: 0800 121 6513.