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Businesses worried about IR35 talent drain

Almost two thirds (62%) of medium and large businesses are worried about missing out on skilled contractors and temporary professionals ahead of the IR35 expansion

The existing off-payroll working rules were introduced in 2000 to stop taxpayers avoiding employment taxes by working through their own companies. They were toughened up for the public sector in April 2017 when responsibility for deciding whether the rules apply and for deducting the appropriate taxes passed from the individual contractor to public authorities. IR35 will be expanded to the private sector from 6 April 2020.

After this point every medium and large private sector business in the UK will become responsible for determining the employment status of any contract worker it uses.

New research from recruitment specialist Robert Half says that two fifths (42%) of medium and large private sector organisations are concerned about losing current temporary workers to the new IR35 rules if they cannot renegotiate employment contracts in time. Only 15% plan to offer more competitive pay rates to their contractors to secure them.

“Business leaders are concerned about the impending IR35 rules and its potential impact on the UK’s temporary talent pool, particularly as firms look for a blend of high-performing temporary and permanent employees to pursue growth strategies in 2020,” said Matt Weston, managing director of Robert Half UK.

There have been a number of high profile cases involving IR35 recently. In the wake of TV presenter Lorraine Kelly winning a £1.2m tax case against HMRC, the Revenue lost another IR35 case against Loose Women presenter Kaye Adams in April. In the case of Adams, it had argued that she was a BBC employee and not a freelancer and should be taxed under IR35. This was ruled against by the First-tier Tribunal.

Last month, however, former BBC presenter Christa Ackroyd lost her appeal against a ruling that she was an employee, not a freelance contractor, when she worked for the BBC.

ICAEW and the Federation for Small Businesses have called for private sector IR35 rules to be delayed.


Originally published in Economia on 13 November 2019.