The Government will most likely announce the private sector IR35 reform in the Budget 2018 in a few days. While the Government has not made any hints about the announcement, the 2 million UK contractors and thousands of businesses that offer service to the sector are bracing themselves for the worst.
Contractors are understandably feeling the pressure due to the rumours surrounding IR35 reform. The Government’s false promises in the recent past for the independent workforce has already created as a sense of dismay among the sector.
According to a survey by Qdos Contractor, only 14 percent of professionals opine that the IR35 reform will not be announced in the next budget. Around 86 percent of contractors think that the changes are highly likely.
Business Community Frustrated by Unmoved Stance of the Government
The Government has always said that the private sector IR35 reform is being considered without giving a definite answer. Mel Stride, the Financial Secretary to the Treasury, has remained tight lipped about the likelihood of having 5.7 million private sector companies determine the employment status of contractors.
The seemingly unmovable stance by Treasury officials and MPs has left the business community confused and frustrated. In case the IR35 reform is extended in the private sector, most contractors are not confident that they will be assessed in a fair manner. The possibility of blanket determinations will result in many contractors unfairly being judged inside IR35.
Still, contractors are prepared for the possibility of a private sector reform being enforced sooner rather than later. A recent survey carried out by Qdos Contractor have shed light on some of the strategies that they will use to manage the off-payroll working rules when introduced.
About 32 percent of contractors have stated that if they are caught inside IR35, they would end the contract arrangement to avoid paying higher taxes.
Moreover, around 30 percent of contractors had stated that they would increase the rates to account for the likelihood of being deemed inside the IR24. This could result in increased cost pressure for private sector companies.
Nearly 21 percent of contractors have stated that they would have their contract reviewed to ensure that they are outside IR35. Lastly, around 17 percent of contractors have started considering other options such as forming their own small business companies in partnership with other contractors or even moving overseas. With millions of contractors associated with the private sector, the impact of these actions on the economy would be great.