IR35 expert, Qdos, has carried out research into the initial impact of private sector IR35 reform. And the findings reveal that contracting outside IR35 is far from over.
The research indicated that contracting outside IR35 has not been wiped out by the reform, with one-third of nearly 1850 contractors assessed as outside IR35 – a figure that Qdos expects to increase as the “dust settles” on the changes.
The biggest group (38%) of contractors had their status set via CEST (HMRC’s IR35 tool), with 25% having had an independent specialist (such as Qdos) decide their status. Just 4% had their IR35 position decided by a third-party automated IR35 tool/technology.
In April, following IR35 reform, medium and large businesses became responsible for determining the IR35 status of contractors. The liability shifted from the contractor to the fee-paying party in the supply chain. These changes mirror public sector reform enforced in 2017.
The key trends to emerge from Qdos’ research include:
- Two-thirds of contractors (65%) have been assessed inside IR35, one-third outside (35%).
- Half of contractors may challenge client’s IR35 decisions (39% will, 11% might).
- Only half (56%) of those assessed are sure they have received a Status Determination Statement (SDS) from their client, despite this being a legal requirement under the reform.
- 65.5% of contractors are either not very confident (40.2%) or not at all (25.3%) confident that businesses will be able to manage IR35 reform.
- Nearly two in three (64%) of contractors were told by their clients they can/must work via an umbrella company (where IR35 doesn’t apply).
“I’m not surprised that there’s clearly still work to be done and contractors aren’t convinced that reform is manageable,” said Qdos CEO Seb Maley about the research findings.
“Reform has landed but that doesn’t mean it’s job done for businesses. Half of contractors might challenge their IR35 assessment, while a similar number aren’t sure if their client has provided them with a Status Determination Statement despite it being a legal requirement. Firms need to remember, preparing for IR35 reform was phase one. Phase two – which we have now entered – is ensuring compliance going forward,” said Maley.