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​IR35: one year in, what’s really happened?

  • Publish Date: Posted 16 days ago

Last year’s IR35 reforms were widely predicted to spell doom for private sector contractors and their employers. Yet one year in, it’s clear that reports of private sector contracting’s demise have been greatly exaggerated. So what happened?

Most contractors survived

It’s true that the number of private sector contractors in IT and telecoms has fallen, from 130,000 in 2017 to just under 100,000 in September 2021. However, that still leaves a sizeable talent pool, and the House of Lords believes many contractors are disguising their status by working with umbrella companies.

Another criticism by the House of Lords, which has strongly objected to the impact of IR35 reform, is that the government’s own Check Employment Status for Tax (CEST) tool is unfit for purpose.

But regardless of the quality of the legislation, contractors and employers have little choice but to fall in line with it–and they’ve done just that.

Recruiters came into their own

After the changes came into force, both clients and contractors realised they needed expert advice and started turning to recruiters (who, after all, have a vested interest in getting it right). Speaking to recruitment consultants should now be considered an essential step in finding your next contract or contractor.

Recruitment agencies not only provide specialist tools to assess IR35 requirements, they also guide employers through the correct process for hiring contractors, and act as a valued source of information and support for contractors themselves, who can otherwise be quite isolated.

The soft landing period is over

HMRC announced a one-year ‘soft landing period’ for the changes: no penalties for accidental non-compliance until 6th April 2022, giving organisations a chance to learn from any mistakes – although deliberate rule-dodging would still be penalised.

With that deadline past, HMRC will catch and fine any medium-to-large-sized business that’s failing to determine contractors’ IR35 status correctly. But this is no cause for concern if you know what you’re doing. Recruiters like us can help. With our expertise, we can take the hassle out of your IR35 decisions and remove any risk from hiring limited company contractors.

Our poll

We asked how employees were feeling about working within the contract world, or if they preferred permanent employment.

Poll results:

Are you more interested in contract or permanent work?

Contract (Outside IR35) - 53%

Permanent - 40%

Contract (Inside IR35) - 7%

Our results highlighted that there is still confusion around IR35 being clearly defined, and whether it is down to the employer or employee to decide.

We have recognised this as being a significant issue and have been working with our contractors and clients for several months now.

We continue to work with clients to demonstrate the impact IR35 is having and will ultimately support them in securing software engineers however they wish to work. However, it is fair to say that any client coming to us asking for an outside IR35 contractor will have a far better choice.

We have also been working with contractors to help them understand their options, but also to ensure that they don’t make any immediate decisions. For anyone who still has questions and concerns about working within IR35, contact our specialist team at ir35enquiries@jamrecruitment.co.uk.