Revised IR35 making contractors look for permanent roles

Due to the UK government’s upcoming revised tax rules, 19% of contractors have said they are looking for permanent roles

Many senior professionals are now questioning whether contracting work will make financial sense after the stricter rules on tax are put into place on 6 April, according to research by Interim Partners.

Fifty- eight per cent of contractors said they have not received any communications from their client businesses over how they will respond to the imminent changes in IR35 rules, with 29% unsure whether the changes will apply to them or not.

The research also showed that 40% of contractors expect their take-home pay to fall when the IR35 rules change in April.

This figure rose to 65% of contractors in the financial services industry.

Iain Pennell, director at New Street Group said the change for contractors moving to more permanent roles makes sense. “They know that HMRC will be taking a much bigger slice of their income from April,” he told HR magazine.

Interim Partners also suggested that businesses need to explain to contractors how they will deal with IR35 or risk them working elsewhere.

From April any business that uses contractors will assume all the liability if their contractors underpay tax, meaning businesses may find themselves unnecessarily exposed to risk.

Pennell added: “For contractors that are deemed to be inside IR35, end clients need to take steps like making sure their contractors are paid through a reputable umbrella company.

“The transfer of debt liability (for unpaid taxes) means this will be a very costly mistake if their partners go out of business or make errors in contractors’ tax treatment.”

The research also found 61% of businesses think the new IR35 rules will have a large impact and are concerned that they will not have enough resource.

Interim Partners conducted the industry wide survey of clients and contractors in December 2019.

Further reading:

Off-payroll review launched

IR35 reform to go ahead

Getting payroll in order for IR35

Lorraine Kelly, HMRC, and the changing definition of self-employed