IR35 | Fifth of contractors seeking permanent roles

Fifth of contractors seeking permanent roles

With changes to off-payroll working rules set to come into effect in April this year, 19% of contractors have shared that they are now looking for permanent roles.

According to research by Interim Partners, part of New Street Group (a consultancy firm), many senior professionals are now questioning whether contracting work makes financial sense and are seeking more permanent roles.

However, the consultancy business has expressed concerns claiming that too many contractors taking up permanent roles would reduce labour market flexibility and access to talent for businesses, not just among contractors but also more skilled and experienced interim workers.

Iain Pennell, Director at New Street Group, said: “The impact of the new IR35 rules is going to be felt by a lot of contractors. Many are already preparing for that by looking for permanent roles instead.”

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The new rules, which will launch in April 2020, will see every medium and large private sector business in the UK become responsible for setting the tax status of any contract worker they use.

Despite the changes to legislation, 58% of contractors surveyed revealed that they have not yet received any communications from their client businesses over how they will respond to the upcoming changes to the IR35 rules.

Worryingly, 29% of respondents shared that they were still unsure whether the changes to IR35 will apply to them or not. However, while penalties for mistakes have been halted for the first year of the new rules, fines of up to 100% of unpaid tax can be put in place after the time period.

Pennell added: “IR35 rules are notoriously complicated and subjective, and the penalties involved will be very serious in a year’s time. There is still a lot of confusion among both individuals and businesses over how the system will work.”

In addition, the research discovered that 40% of contractors expect their take-home pay to fall when the changes to off-payroll rules come into place, meanwhile 61% of businesses have shared concerns over attracting new talent after April 2020.  

Recently, Journalist Eamonn Holmes was hit with a £250,000 tax bill by HM Revenue and Customs, after he lost his case despite claiming he was working as a freelancer.

Following the news, Dave Chaplin, CEO of ContractorCalculator, pointed out that the legislation around IR35 was still too confusing for workers to understand, which may have resulted in some TV presenters being fined.

He explained: “This is not a case of tax avoidance, and not the kind of situation which the IR35 legislation was brought in to combat, 20 years ago. In my view neither Holmes nor ITV shares any blame here – the fault lies with an unworkable piece of legislation that no-one properly understands.”

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