Government claims that IR35 reform has led to growth in contracting

IR35 expert, Qdos, has responded to the government’s report into the impacts of the introduction of the off-payroll working rules (IR35 reform) in the private sector.

Introduced in 2021, the rules shifted the responsibility and liability for IR35 status of contractors to the businesses engaging these workers.

The report estimates that the rules have created an estimated £4.2 billion in additional tax and that 120,000 contractors have been affected by the reform.

Those affected pay, on average, £10,000 a year more in tax and around 45,000 fewer people started working this way around the time of the changes, more contractors have been unaffected than affected by the changes and there are now more opportunities for contractors than prior to the reform.

It states: “We have seen evidence that only a small number of individuals may have moved from working through their own PSC to potentially not working over the time of the reform; and we estimate that more PSC workers have been unaffected by the reform than affected. Overall, we estimate total employments across all types of work for PSC workers have increased when comparing a point in time before the reform to a point in time after the reform.”

Qdos CEO, Seb Maley, said, “There are some bold claims in this report. The impact of the off-payroll working rules has been continually downplayed. But this document takes it to new heights. To say that there are now more opportunities for contractors following the changes is nonsense.

“The reality is, these rules created confusion, uncertainty and damage to the contracting landscape. Many businesses stopped engaging contractors as a direct result of the reforms. The truth is, it’s taken years for firms to get to grips with the rules – something we are seeing gradually, but there’s still some way to go.

“It’s important to note that £4.2billion more in tax doesn’t necessarily equate to increased levels of compliance. Far too often, contractors have been placed on the payroll or inside IR35 despite being clearly self-employed. This increases the government’s tax take.”