70% of contractors without support throughout the pandemic
With it being almost a year since the coronavirus pandemic hit the UK, and now less than 2 months to go until the IR35 reforms come into effect, we thought it would be a good time to check in with our contractor base.
Of course, we have heard many positive and negative stories over the last year from our customers, but we decided to open up a survey to our entire base of contractors to build a comprehensive view of how they are coping and what Kingsbridge can do to support them through this transition.
We received a staggering 2,727 responses from our contractors, so thank you if you were one of them! The survey was made up of 30 questions, covering their thoughts and experiences through the coronavirus pandemic and onto preparations for IR35. So how have our contractors faired throughout lockdown? And how are they feeling about the pending IR35 reforms?
The highs and lows of Lockdown
As the title of this blog shows, 70% of contractors did not utilise any Government or financial support during the pandemic. There has undoubtedly been less support available for the self-employed, with some workers ineligible to claim on any of the schemes available.
With the spring budget just a month away, there are calls for more support for the self-employed. Time will tell if there are any new schemes introduced.
For the contractors that did claim financial support, 30% of contractors were able to claim using the Coronavirus Job retention scheme (also known as furlough). This scheme was not designed for the self-employed, so it’s not surprising that overall, there was only a small uptake for this scheme.
When asked how the pandemic had impacted them financially, there was a real divide with this answer. Many contractors unfortunately had no work or very little work since the pandemic started, with others mentioning having to slash their rates in order to get work.
Equally, some contractors actually gained more work through the pandemic and were able to take on new opportunities. One contractor commented “it allowed me to take on more work, as I was working remotely, I was able to work multiple contracts at the same time.”
Many also mentioned that whilst work was low, it is now gradually picking up again. Some contractors also mentioned being able to save money working from home, cutting their petrol and overnight accommodation costs to virtually nothing.
In particular, workers in the IT and Telecommunications sector and the Construction industry seemed to have a more positive experience than the average contractor. With the mass change to remote working for the majority of the country, this would have given many opportunities for the IT sector to harness.
Meanwhile, the Construction industry was one of the few industries that was permitted to remain open throughout the majority of the lockdown periods. On the other end of the spectrum, as we suspected, contractors newer to the game particularly suffered, with many saying there wasn’t enough support for new businesses.
New businesses were ineligible for a lot of the Government schemes that were made available.
Calls to delay IR35
When asked what the Government could do better to support contractors, one aspect that was mentioned again and again was the IR35 reforms. Some contractors made calls for it to be cancelled, to provide more clarity on the legislation or to delay it again, with feedback including comments such as “delay the changes to IR35 until the lockdowns are over and people can start to get back to work.”
As we’ve already stated, we don’t believe that IR35 will be delayed again.
Andy Vessey, Head of Tax at Kingsbridge comments “the course of the extension of the reforms into the private sector will not be delayed again and, within time, I would expect the rules to be extended right across the board, so that the same IR35 rules apply to everyone. The Exchequer desperately needs tax revenue and HMRC have convinced themselves that the public sector reforms are a success, so I see nothing at the moment that will distract the government from forging ahead.”
Contractors feel prepared for IR35
Although contractors may be dreading the reforms, they are mostly for them. 75% of contractors said that they feel prepared or somewhat prepared for the IR35 reforms in April.
In contrast, 55% of contractors do not think that their industry/agency/end client are ready for the reforms. The main reasons for this included them not being aware of the rules and the negative repercussions it could have; finding IR35 overcomplicated or just being focused on other things (i.e. coronavirus and Brexit).
To add to this, over a quarter of contractors don’t expect to have an IR35 assessment until post-April. It’s now more important than ever to communicate with your recruiter or end-client, to make sure they are aware of and understand the changes and ask them how they will be assessing you.
Contractors will not accept an inside IR35 assessment
In our survey, we asked our contractors what they would do if they were asked to work inside IR35 – only 14% said that they would accept this. 40% of contractors said they would instead look to charge a higher day rate, most likely to recoup some of the loss in income for being placed inside, whilst a further 30% of contractors said they would simply leave the role and seek an alternative contract.
Furthermore, when we asked our contractors how they would be assessed for IR35, 10% told us that they would (or already have) been subject to a blanket inside determination, with comments including “Blanket assessment for all contractors. All contracts inside IR35”. Andy Vessey comments that “there will no doubt be organisations that will still take a risk averse approach and will not want to engage with the off-payroll rules and therefore will only hire contingent workers via umbrellas or agency payroll.”
“However, I would hope that the dystopian economic landscape that awaits us all will cause some end clients to reconsider their hiring strategies and take a more flexible approach, particularly where there is 13.8% employers’ NIC to be saved!”
Making sure that your contract is watertight is the best way to ensure you are working outside IR35, and to ensure that your fee-payer or end client assesses you as such.
How can you prepare for the reform?
We know from our survey that our contractors aren’t necessarily feeling that supported, both by the Government and perhaps by their fee-payer/end client, some of which could be doing more to communicate with contractors and to review their IR35 practices. Kingsbridge, however, is here to help.
If you need more information on IR35, simply head over to the IR35 section of our Knowledge Hub, where you can find a wealth of information – including on the key IR35 status tests; Mutuality of Obligation (MOO), Control and Right to Substitution. If you do have any IR35 specific questions, you can always ask our resident Tax Expert, Andy Vessey, who will be happy to oblige. Click here to ask your questions.
And if you need to show your end-client your IR35 status, our award-winning status tool is here. For just £50 plus VAT, you can get a full review of your working practices.
Our hybrid tool is the best of both – if your case is clearly inside or outside, you will get an instant determination, if your case is borderline, it will be handed over to our IR35 expert team to perform a manual review. Upon completion, you will receive a comprehensive report which outlines the strengths and any weaknesses of your engagement.