Contractors to reject their client's IR35 decision

The majority of contractors who had been assessed as inside IR35 by their private sector client plan to revert back to working outside the scope of the legislation, as a result of the recent delay to IR35 reform.

After the Treasury announced that changes to the off-payroll working rules in the private sector have been postponed by one year because of COVID-19, contractors will retain the right to decide their own IR35 status for a further year when engaged by medium and large companies.

On April 6, 2021, these firms will be transferred the IR35 responsibility, while the risk will be shifted from the contractor to the party tasked with paying the worker next year also.

Over 1000 limited company contractors surveyed by IR35 specialist, Qdos, revealed:

• Most (56 per cent) contractors placed inside IR35/working via an umbrella or PAYE intend to revert back outside IR35, 27 per cent are unsure, while 17 per cent will not
  
• The majority (56 per cent) had already been IR35 assessed by their private sector client
  
• More than half (52 per cent) had been determined inside IR35
  
• Forty per cent said they had been 'blanket-placed' inside IR35, but a third of this group have had this decision reversed by their client.

Unfair

Qdos CEO, Seb Maley said: "Thousands of contractors have had no choice but to work inside IR35 and therefore don't trust the accuracy of their client's decision, which determines if they pay tax as a self-employed individual or as an employee. To make matters worse, these contractors - a huge portion of whom are genuinely self-employed - don't receive any employment rights despite being classed as an employee for tax purposes.

"Those who feel they've been unfairly assessed or contractors who have had no choice but to work through an umbrella company or as an employee to keep their client, want to revert back outside IR35 - and I don't blame them. But before working outside IR35, contractors must make sure their contract belongs there. It also goes without saying that a client has to agree to engage outside IR35 contractors once again too.

"From a client or recruiter's perspective, when reform is finally rolled out, as long as the contractor is engaged under the correct IR35 status, whether they work inside or outside the legislation shouldn't matter. With one more year until the changes arrive, businesses that banned outside IR35 working now have a chance to rethink their strategy. That said, this time must be used wisely and preparations need to start now."