Six out of 10 'outside IR35'

Six out of 10 freelancers consider themselves to be outside the so-called stealth tax IR35 – while two out of ten think they are caught by it and a further two out of ten are unsure.

The survey, conducted by UKTECH, the UK’s largest network of freelancers, is one of the biggest and is the most recent carried out in this area, covering 543 individuals from IT, engineering and other knowledge-based businesses.

It found that 60 per cent (329) considered themselves outside IR35 this year; 21 per cent (111) considered themselves caught by IR35; and 19 per cent (103) were uncertain of their status.

The level of uncertainty caused by the lack of case law relating to IR35, together with the fear of penalties if the Revenue subsequently found against the freelancer, has caused many small businesses to be unable to operate with any confidence in the knowledge-based sector.

Andy White, managing editor of UKTECH and leading campaigner against IR35, said: “Although the majority of freelancers who completed our survey believe they have moved outside, it is still bad news for the 40 per cent who are caught or unsure – and that is bad news for the UK economy to have such a high proportion of this highly-skilled and entrepreneurial workforce having to operate with this level of uncertainty.

“This does show that the operating environment is changing and, with professional support and comprehensive information, I believe that this 40 per cent can be significantly reduced in the coming year, as freelancers learn how to move themselves outside IR35.

”This survey was conducted within the UKTECH network of freelancers, who are likely to be among the best informed about IR35 and related matters. But there will be a wider community who do not have access to reliable information and who decide to ‘tick the box’ and pay the tax, without considering all their options.”

The survey was conducted online among members of the UKTECH network in January 2003. The question asked was ‘For this year, do you consider yourself to be a) caught by IR35; b) outside IR35; or c) unsure of my status?’