Do Contractors Understand the Ins and Outs of the IR35 Changes?

IR35

As the new IR35 changes come into play this month, many contractors are left wondering how it might impact them.

The new legislations being introduced are complex and tough to understand. So, do contractors truly understand the in and outs of the IR35 changes? A recent survey has revealed how contractors currently feel about the IR35 changes. Here, we’ll look at what the study found and the changes taking place that contractors need to be aware of.

How do contractors feel about the IR35 changes?

Contractor views on IR35 have been provided by a recent survey carried out by Interim Partners, who supply temporary staff such as an interim director to businesses. It revealed that 29% of those surveyed didn’t know whether they were inside or outside of the IR35.

A staggering 58% of contractors have also not been contacted by from their clients relating to IR35. In terms of pay, 40% of contractors are expecting their pay to decrease from April 2020. Worryingly, 15% of contractors are unsure how it will impact their work.

Understanding IR35

It is clear from the recent survey that many contractors have no idea how IR35 will ultimately impact them. There is also a general lack of knowledge as to what it is and what the changes mean.

IR35 is a unique set of legislations which related to deemed employees. Set up in April 2000, the goal of IR35 was to prevent tax avoidance. Firms were able to hire contractors to do the role of a full-time employee. As the contractor isn’t classed as a full-time employee, the firm and the contractor pay a reduced tax.

The legislations relating to IR35 have always been difficult to understand. However, the recent changes are proving particularly confusing for contractors in the UK.

What are the changes taking place?

The most significant change coming to IR35 this month, is off payroll working. This means, more contractors will fall under the IR35 umbrella. If they are found to be carrying out work which would otherwise be deemed full-time employment, they will need to pay the same tax rate as an employed person.

For those who don’t yet fully understand the new rules, the good news is there won’t be any penalties for errors during the first year of its introduction. Advice can also be sought from industry professionals to ensure full compliance.

The changes to IR35 have proved controversial. The government has faced a lot of opposition, but it argues that tax avoidance needs to be addressed. Contractors have been left worried about how the new changes might impact their take home pay, with many considering switching into full time employment as a result.

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