A new study has revealed that most contractors who have been assessed as within the scope of IR35 by a private sector client intend to revert back to being outside IR35 following the Government’s 12-month delay to the launch of the off-payroll rules.
A survey of 1,000 limited company contractors found that 56 per cent of contractors who had been placed inside IR35 and are working via an umbrella or PAYE, intend to revert back to working outside of IR35, while a further 27 per cent are undecided on what approach to take.
The same number of contractors (56 per cent) said they had already been assessed by their client, of which 52 per cent had been deemed to be inside IR35.
Worryingly, 40 per cent of those surveyed believed they had been placed inside IR35 as part of a blanket approach by their client. However, a third said that the client had reversed this decision after they appealed.
This shows that many businesses are now taking a pragmatic and fair approach to avoid banning genuine contractors, which will hopefully be replicated when the rules come into force next year.
The Treasury has announced that as a result of the COVID-19 pandemic it intends to delay the changes to IR35 until April 2021 to assist contractors and businesses in their preparations for this landmark change.
This gives contractors the right to decide their own IR35 status for a further year. After this date, it will become the responsibility of the client to determine status and pay contractors accordingly.
Despite this delay to the off-payroll rules, it is important that contractors begin to make preparations for next year and communicate with clients about their intentions for determining their IR35 status.