The coronavirus isn’t the only thing causing problems for the self-employed. This month, changes in IR35 are set to bring even more challenges for contractors.

As more workers fall under the umbrella of IR35, 19% of contractors will look to permanent roles according to a recent survey.

What is IR35?

IR35 relates to different tax legislations which have been introduced to tackle tax avoidance.

Known as “deemed employees” by the HMRC, contractors and freelancers can often get out of paying a higher tax bill by carrying out work for a company that would otherwise be paying them as a full-time employee. Similarly, the companies themselves can avoid paying more tax by hiring contractors to take on the equivalent of full-time work.

IR35 was actually introduced back in April 2000. However, it has received heavy criticism by the business community, alongside tax experts, stating that it is poorly conceived. It is for this reason changes are being made to the legislations

What changes are being made?

The new changes being introduced mean that firms will have to assess the status of the contractor’s they use, as well as pay employment taxes, alongside the money they pay to the contractor. This could see thousands of pounds being added onto their annual tax bills.

This change in IR35 is known as Off-Payroll Tax and it’s proving to be extremely confusing for both contractors and businesses.

Why are 19% of contractors considering a permanent role?

According to a recent survey by a top Interim recruiter, 19% of contractors are considering taking on a permanent role due to the IR35 changes. They worry about the impact it’s going to have on their earnings, and many have no clue how the changes will impact them.

The survey revealed that 29% of surveyed contractors have no idea whether they are outside or inside of IR35. Furthermore, 58% of contractors have also received no communication from their clients about IR35.

The sectors most hit by the new changes in legislation are expected to be the financial and manufacturing and engineering sectors. It isn’t just contractors who are worried about the changes either. In the survey, 61% of businesses are also worried they won’t have enough resources due to a lack of contractor talent.

There is no denying the changes in IR35 are causing concern for businesses and contractors. Combined with the current coronavirus crisis, many contractors are now considering switching to full time employment.

Those who may be affected by the changes in IR35 should consider seeking professional advice. It is a complex set of laws that can be difficult to understand so outside help could prove invaluable.