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'IR35 is becoming a storm in a teacup' contractors to be hit by Covid & Brexit – get ready

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Patrick Hopkins, an Associate Director at Theta Global Advisors, commented on these findings: “The data from our research is indicative of a seismic shift in the relationship between companies and contractors following covid-19, Brexit, and the reform of IR35 tax regulations. “One sees a notable disparity between the approach of companies to these new regulations and what contractors and clients deem appropriate for these contracts and working relationships.

“With the vast majority of contractors deeming blanket ‘inside IR35’ approaches to their contracts as unsuitable, alternative resourcing models for specialist IT services is needed in our newly digital age. These service providers have shown a remarkable ability to adapt, with 75 percent of respondent reporting that Brexit has had little impact on their work and contractors shifting seamlessly to working from home models following covid-19.

“However, despite this adaptation, the combination of these tumultuous events with IR35 tax reform has left contractors reconsidering their positions as PSCs, instead considering a return to permanent employment, and for some, even early retirement. Given this rumbling IR35 debate continuing on in the background of cancelled or delayed contracts in 2020 and 2021, new, innovative approaches are needed to resolve the challenges of companies to recruit specialist resources for individual projects.

“Blanket ‘inside IR35’ approaches are already being deemed inappropriate before even coming into effect, likely to attract less skilled resources with lower quality experience to companies for their specific projects requiring unique expertise. This blanket approach does not even benefit those contractors attracted given reduced day rates which is the appeal of sacrificing the benefits of permanent employment for contract work.

“As such, innovative approaches from companies to contractor work to offset fears of negative IR35 assessments, and offering of dividends, and higher day rates is necessary to maintain the level of talent companies have become accustomed to EU relations, and wider offering of talent with the introduced normality of flexible and remote working following covid-19.”



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