From Business to Business: A design for managing IR35...

Mark Ridley, a freelance business analyst, entered the contracting market in 1990, building up his limited company as he moved from client to client. IR35 has cost him dearly, but he has shrugged off the extra burden by additionally running his own design consultancy.

With ten clients in as many years, Mark's IT business, Crocus Information Ltd. grew rapidly after he set it up to independently market his SSADM (Structured Systems Analysis & Design Method) skills, a widely-used computer application development method in the UK that is often specified as a requirement for Government IT projects.

Using profits from his company, Mark, another freelancer friend and a business acquaintance jointly set up the event and design services company: Kaos Design Ltd.

Mark Ridley: Kaos is an exemplar of entrepreneurial spirit, dampened by the IR35 legislation

Mark explained the company's background.

He said: "I believe our development of the Kaos company is an exemplar of the entrepreneurial spirit that has since been dampened by the IR35 legislation.

"Kaos designs and provides decor and themes for corporate events, functions and parties, exhibitions, conventions and award ceremonies and also rents out props. We also provide a full design and branding service and have previously completed projects for companies including: Manchester United; The Eden Project; McDonalds; and the nightclub, Cream.

"It is not hugely successful, yet, but it is still employing five full-time and 10 part-time staff and has a slowly-growing annual turnover of between £140,000 and £200,000."

Although Mark's design business is taking off, he is still concentrating on providing services to the IT industry.

He continued: "I am still a freelancer by trade and my company, Crocus Information Ltd, is currently undertaking a project providing Business Analysis services to the much-publicised London Congestion Charging Scheme."

Mark spoke of his disappointment over the Government's introduction of IR35 and the effect it has had on the growth of his freelance consultancy business.

"I do believe I am fully outside the remit of IR35, though the research that led me to this conclusion has cost my company dear.

"To give an example, I recently had to refuse a six-month extension to a contract at British Gas at a rate of £420 a day because the agency contract wording didn't match the contract with the client. The agency refused to change it without the client's say so, which wasn't forthcoming, presumably because of the legal costs involved in making the changes and the number of contractors already undertaking work there. I was subsequently 'on the bench' for four months...

"Thanks to Hector, the uncertainty of whether I would be in or out cost me a total of £33,000."

"I believe my main competitors, the consultancies and body shops, have actually had their positions strengthened by IR35. I believe the lack of certainty, and the legal costs involved in obtaining clarity have made it easier for larger companies who are excluded from IR35, to place consultants."

Mark explained the 'catch-22' situation involved in communicating with the Government over the difficulties freelance businesses like his face.

"I have sent short notes to Linda Gilroy, my local MP (Labour MP for Plymouth Sutton), via the Professional Contractors Group's website to voice my concerns, but listening to her in the media, I must say I have no faith in her. I was going to write a detailed account of my own particular entrepreneurial history and what the impact of IR35 was, but I just couldn't devote the time to it."

Asked about the short-term future of the UK freelance sector, Mark admitted his first thoughts were of those in the contracting community that were being disallowed from going permanent to keep the money coming in.

"Although it doesn't directly affect me, I'm most concerned about the recent news that agencies are being asked not to put forward ex-contractors for fear they'll jump ship when the market picks up. I am worried for my fellow independent freelancers," he said.