IR35 - research request - implications for businesses - can anyone help?

[Paralytic]

So to summarise then, the monies that we currently raise in taxes from our activities will now be raised from the client's activities with no net gain or loss in overall revenues - except of course the destruction of the flexibility on which a lot of the knowledge economy is based. So no immediate direct impact, just a general ossification of UK-based skills as people stick to their own region for work.

It's comparable to the insistence of high level security clearance above ability to do the job in the public sector that means you just recirculate the same old pool of people. Slowly the skills decay, others move ahead in the technology race and guess who is the loser...

Also the current flexible economy at around 2019 was generating about £50bn directly to GDP. I would be amazed if the new regime gets near to that.

I'm not saying its correct, but, generally, yes. I doubt we'll ever know, however, as it will be very difficult to measure the impact of the IR35 changes - it'll be a bit of white noise in the overall Covid cacophony with regards to our economy over the next few years.

[malvolio]

I guess my feeling is that client budgets will still be there, and they'll find someone local or remote. Very few clients won't find someone due to people not being able to travel - there's just not that many niche sectors where that is an issue.

So, the money is still floating about the system, but less will go directly from client -> contractor -> spend -> taxes, but instead go client -> employee -> PAYE taxes

In 5 years, i simply don't think we'll be able to look back at 2021 and beyond and see a reduction in HMRC takings that can be attributed back to the IR35 changes being rolled out to the private sector.

So to summarise then, the monies that we currently raise in taxes from our activities will now be raised from the client's activities with no net gain or loss in overall revenues - except of course the destruction of the flexibility on which a lot of the knowledge economy is based. So no immediate direct impact, just a general ossification of UK-based skills as people stick to their own region for work.

It's comparable to the insistence of high level security clearance above ability to do the job in the public sector that means you just recirculate the same old pool of people. Slowly the skills decay, others move ahead in the technology race and guess who is the loser...

Also the current flexible economy at around 2019 was generating about £50bn directly to GDP. I would be amazed if the new regime gets near to that.

[Paralytic]

So what about the loss of business expenses meaning contractors can only really consider work close to home? That hasn't been an impact yet due to lockdown(s), but will hurt companies outside the London bubble. Would you you work in Telford if you weren't being well paid to do so?

What about the impact of reduced disposable income on spending habits: probably minor overall but not insignificant.

As for tax, at my peak I was generating round £45k a year in taxes of various kinds. That is a salary of well over 100k a year as a permie; not too many inside IR35 gigs like that out there...

I guess my feeling is that client budgets will still be there, and they'll find someone local or remote. Very few clients won't find someone due to people not being able to travel - there's just not that many niche sectors where that is an issue.

So, the money is still floating about the system, but less will go directly from client -> contractor -> spend -> taxes, but instead go client -> employee -> PAYE taxes

In 5 years, i simply don't think we'll be able to look back at 2021 and beyond and see a reduction in HMRC takings that can be attributed back to the IR35 changes being rolled out to the private sector.

[malvolio]

I'm not sure it will. I suspect it will reduce CT takings (via reduced/disappeared PSC profits) but that will generally be offset by the increased ER/EE NI and PAYE tax as a significant number of contractors who were disuguised employees switch to PAYE/Umbrella.

So what about the loss of business expenses meaning contractors can only really consider work close to home? That hasn't been an impact yet due to lockdown(s), but will hurt companies outside the London bubble. Would you you work in Telford if you weren't being well paid to do so?

What about the impact of reduced disposable income on spending habits: probably minor overall but not insignificant.

As for tax, at my peak I was generating round £45k a year in taxes of various kinds. That is a salary of well over 100k a year as a permie; not too many inside IR35 gigs like that out there...

[Paralytic]

Companies wont stop using contractors as they always have done. It's just the payment mechanisms that will change. And the economic impact will not be on the clients but on the wider economy by drastically cutting tax income.

I'm not sure it will. I suspect it will reduce CT takings (via reduced/disappeared PSC profits) but that will generally be offset by the increased ER/EE NI and PAYE tax as a significant number of contractors who were disuguised employees switch to PAYE/Umbrella.

[malvolio]

Companies wont stop using contractors as they always have done. It's just the payment mechanisms that will change. And the economic impact will not be on the clients but on the wider economy by drastically cutting tax income.

[northernladuk]

You think HR is lacking in knowledge about IR35, wait till you speak to some of the contractors that come on here!

[sludgesurfer]

I would love to hear your experiences

Plenty of experiences here:
https://offpayroll.org.uk/

[Dizhead]

Hi - I'm a research student investigating the implication of IR35 now on businesses. This is from the viewpoint of the private sector. Many in HR may be lacking in knowledge of how to progress status checks on contracts (especially in view over inaccuracies of the CEST tool) and some companies may just be stopping using contractors altogether. I would love to hear your experiences. Good and bad. There is little research to date on this - so this will form new research findings. If anyone would be happy to discuss further - please get in contact. If anyone would like to contribute to the research I have a questionnaire I can arrange a non-disclosure and ethics form to confirm no names or companies will be named in the research. Please get in touch. Liz O'Donnell