IR35 Remains Contractors’ Biggest Concern For 2023

Despite inflation reaching a 41-year high recently and the raft of tax freezes and tax hikes to be introduced in the 2023/24 tax year, the IR35 legislation remains contractors’ biggest concern for the year ahead.

This is according to research carried out by IWORK Partner and IR35 insurance provider Qdos which surveyed 700 contractors regarding the key issues impacting independent working in the UK, as part of the firm’s Annual Contractor Survey.

More than a third (36.2%) cited the IR35 legislation as their biggest fear for 2023, compared to those who see the rising cost of living (31.7%) and incoming tax increases (25.2%) as the main challenges to overcome. This is likely a result of IR35 being perceived by contractors as the biggest contributing factor (61.1%) to poor business performance in 2022.

While eight in ten contractors said they were able to secure a contract outside IR35 last year – marking a 15.4% increase on 2021 – nearly half (44.3%) said this was difficult to accomplish. This year, the majority of contractors (61%) are of the opinion that it won’t become any easier to secure contracts outside the scope of the IR35 legislation.

Commenting on the findings, Qdos CEO Seb Maley said:

“There is a cost of living crisis happening, yet IR35 remains contractors’ greatest fear for the year ahead.  Whichever way you look at it, the introduction of the off-payroll working rules has made operating outside the scope of IR35 more difficult for genuinely self-employed contractors.

“True, most contractors were able to secure contracts outside IR35 last year.  This is hugely positive given that the vast majority of contractors, in our view, belong outside IR35.  But there’s clearly still a lot of work to be done, particularly by businesses.  Far too many have insisted that contractors operate on the payroll, regardless of their true IR35 status.  This is a needless, expensive and sometimes even non-compliant approach to managing IR35.

“HMRC is making no secret about its increased IR35 compliance activity, either.  This will no doubt play on the minds of contractors, and indeed businesses, which can also be hit with massive tax bills for non-compliance.”

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