Empowering the Freelance Economy

Outside IR35 contractor numbers to rise says specialist

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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. 

The CEST tool, however, has proven unreliable and inflexible, leaving some freelancers in limbo, as previously reported by The Freelance Informer.

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.

“Whichever way you look at it, contracting isn’t dead – nor will IR35 reform spell the end to working in this way. And I’ve no doubt that as the dust settles, more businesses will get to grips with the changes, reverse needless contractor bans and compliantly engage contractors outside IR35.”

Qdos CEO Seb Maley
Seb Maley CEO of Qdos on the expected rise of outside IR35 contractors
“Reform has landed but that doesn’t mean it’s job done for businesses.” – Seb Maley, CEO of Qdos

“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.

Are you challenging your IR35 status? Start a discussion in our comments section.

Related articles you may find interesting

The True Cost of IR35 to contractors and the economy

Is the government’s equalisation argument flawed?

To read more on IR35 and related matters go to our IR35 section here.

3 Comments
  1. James says

    Hello,

    I work in the offshore renewable sector as a Ltd company.

    I am contracted via a third party (agency) for one of the main global companies in the industry. My experience of the new IR35 legislation, is this, The large majority companies (end client) within this industry are stating all their UK contractors are all classified as been within IR35.

    When I was given information from my agency, that the client considers me as been within IR35, my initial responce was, OK, why, cab you please explain the reasons for this?

    I then checked the articles within the signed contract with the agency and conducted the online CEST, this came back as been outside. I can honestly say the answers I populated during the assessment were true and accurate to how we are hired/contracted.

    I then forwarded this certification from the UK Government website and questioned under what basis I’m classified as been inside?

    After numerous emails later, I was informed that I would have to REQUEST an SDS from the client, but it would make no difference, its rather accept the decision or NO work!

    I persevered and have conducted an assessment with the end client, consisting of, quite a lengthy online Q and A submission. This has also come back as inside – what I was taken back with there whilst completing this assessment was a whole variety of questions that were “pre answered”. Something like 25 in total. But with no reference text of the answers

    I again emailed the department dealing with the SDS and requested some transparency and could I see the text within the “pre answers”. I have received them, and I’m quite frustrated to say the least, the words that spring to mind are, negligent misrepresentation.

    I have raised a dispute giving my reasons, (there was quite a few). I am still waiting for the conclusion.

    I do beleive nothing will come of it, it is their view point of my SDS and I truelly beleive it will be like the agency has said, accept it or no work!

    This particular industry is in a very sad state of affairs regarding the new IR35 regulation, its as if all the big global companies have just thrown a blanket over the whole industry for the UK contractors.

    This is already having a negative effect on UK manpower working with this industry, Most people I know will not accept a contract while the end client is insisting on all UK contractors been with in this rule. Long term effects will be devastating on an industry that is already heading towards a crisis with manpower shortages as even more OWF gear up to transition into the execution phase of the planning.

    The government must be lobbied and these companies held to account for the misrepresentation of all the UK contractors falling victim to this.

    Come on guys let’s get this mess sorted out before it’s too late!!!!!

  2. Colin House says

    Hey James, it will be no consolation nor come as a surprise to you to learn that this appears to be the default position of every ‘agency’ out there, no matter what sector. I’m a freelance Construction PM and all the RA’s that have approached me want to put me into IR35 even though contracts are for limited time periods. On top of that, they want to issue recurring 3-monthly contracts, which means that I/we cannot get the same benefits as full time employees even though we are effectively employed by these firms. (I stand to be corrected on this, but it seems like a stitch up to me!)

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