February 7, 2020
IR35 pushes freelancer confidence to six-year low
Two surveys have highlighted continuing fears among freelancers about the changes to the IR35 rules due to take effect in April. The reforms will shift the responsibility for defining contractors’ tax status from the individual to the employer to crack down on so-called ‘disguised employment’, where off-payroll workers are able to pay less tax than employees. However, concerns have been raised that the rules could force organisations to bring genuine contractors and freelancers on to the payroll, reducing flexibility for both parties.
The first survey of more than 800 freelancers was carried out by IPSE (the Association of Independent Professionals and the Self-Employed) and PeoplePerHour and used to compile their quarterly Confidence Index report. The findings suggest freelancers’ confidence in their businesses over the next three months has been driven to a six-year low by government tax policies and regulations. This is despite the fact that their confidence in the wider economy was recovering when the survey was taken late last year against the backdrop of a likely Conservative victory and a break in the Brexit deadlock.
The survey also suggests freelancers’ earnings dropped by 6 percent in the final quarter of 2019 and they expect them to continue to fall, while 71 percent also expect their business costs to rise over the coming year.
Inna Yordanova, Senior Researcher at IPSE, said: ‘Freelancers’ confidence in their business performance has reached record lows and this seems to be because of fears about the changes to IR35 due in the private sector in April.
‘The IR35 changes appear to be behind the confidence dive because confidence has fallen sharply in the two groups that will be affected most by them: Standard Occupational Category 1 and 2 freelancers. In fact, if you focus on these groups, which include managers, directors, senior officials and professional occupations, their confidence has truly plummeted this quarter.
[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The changes to IR35 are causing alarm right across the freelance sector and they should be halted before they do serious damage to this vital part of the workforce.[/perfectpullquote]
‘This alarming slump in freelancer confidence should be a wake-up call to government. The changes to IR35 are causing alarm right across the freelance sector and they should be halted before they do serious damage to this vital part of the workforce.’
Xenios Thrasyvoulou, founder and CEO of PeoplePerHour commented: ‘I am disappointed, but not surprised, to see another fall in freelancer confidence this quarter, to the lowest in six years. It seems that whilst freelancers are more confident about the wider economy, their confidence in their own industry has fallen off a cliff, thanks to the IR35 changes coming into play in April.
‘There is still a chance for government to address these issues and listen to the concerns of this important industry, before more damage is done.’
One in five concerned
In the second survey, a fifth of 2,000 people polled by Tiger Recruitment expressed concern about the impact that the IR35 changes will have on freelancing and temping opportunities.
Apprehension was greatest among workers in the automotive (36 percent), energy, gas and renewables (35 percent), transport and logistics (33 percent) and IT (31 percent) sectors, which are all heavy users of contract workers. Those in banking and capital markets (26 percent) and education (26 percent) were also more concerned than workers in other sectors about how they will be affected by the new rules.
‘Contractors, freelancers and temps play a vital role in the workplace, giving employers access to quality talent for short-term resourcing needs, while offering individuals a level of freedom and flexibility that can’t be found in a traditional role,’ comments David Morel, CEO, Tiger Recruitment. ‘While the upcoming changes are designed to crack down on those who are abusing the system, the Government must be careful that they don’t throw the baby out with the bathwater by reducing workplace flexibility in the process. Meanwhile, employers must ensure they are adequately prepared, so that they can continue to take advantage of flexible talent, without the risk of facing bills for outstanding taxes and additional penalties.’
