Martin Lewis talks self-employed pension options with expert
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IR35 changes were introduced in April 2021, with medium to large businesses being forced to assess the tax status of off-payroll workers they hire. Many experts in the field warned these changes would raise costs and hinder the usage of contractors and self-employed workers and on this, research has been conducted on how the industry is coping.
Qdos, the IR35 experts, recently carried out extensive research into the initial impact of the introduction of IR35 reform in the private sector.
This involved insight from 1,846 contractors who have been affected by the changes.
Qdos highlighted the following key trends and “stories” to emerge from the research:
- Two thirds of contractors (65 percent) have been assessed inside IR35, one third outside (35 percent).
- Half of contractors may challenge client’s IR35 decisions (39 percent will, 11 percent might).
- Only half (56 percent) 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.
- The biggest group (38 percent) of contractors had their status set via CEST (HMRC’s IR35 tool), with 25 percent having had an independent specialist (such as Qdos) decide their status. Just four percent had their IR35 position decided by a third-party automated IR35 tool/technology.
- 65.5 percent of contractors are either not very confident (40.2 percent) or not at all (25.3 percent) confident that businesses will be able to manage IR35 reform.
- Nearly two in three (64 percent) of contractors were told by their clients they can/must work via umbrella company (where IR35 doesn’t apply).
Seb Maley, CEO of Qdos, commented on these findings: “I’m not surprised that there’s clearly still work to be done and contractors aren’t convinced that reform is manageable.
“But even so, 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.
“Reform has landed but that doesn’t mean it’s job done for businesses.
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“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.”
Seb went on to provide guidance on how compliance can be adhered to, for both firms and the contractors they hire.
Many feared businesses would categorize all the contractors they hire as “inside” IR35 but Seb urged caution on this.
He said: “Businesses mustn’t blanket place all contractors inside IR35 and need to carry out assessments with ‘reasonable care’.
“Best practice is to decide IR35 status on a case-by-case basis, given the complexity of the legislation and how even minor changes in a contractor’s contract or working practices can alter true IR35 status.
“Something else often overlooked is the need to review a contract should the way in which the service is delivered change.
“Failure to do so could result in non-compliance, which is why contracts need to be regularly assessed.”
Seb concluded by providing guidance to the workers directly impacted by the changes: “Unless a contractor is engaged by a small company they are not responsible for determining IR35 status anymore.
“But that’s not to say contractors are powerless.
“From having their contract assessed separately by a third party to ensuring they operate as a genuine business at all times – and not as a disguised employee – there certainly are ways for contractors to help their clients make the right decision.”
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