IR35 Legislation: More Than Four In Ten UK Businesses Plan To ‘Phase Out’ Contractors Ahead Of The I

By bedigital on January 10th, 2020

New research looking into the understanding of UK business owners regarding the upcoming IR35 legislation, undertaken on behalf of digital solutions provider bedigital, has revealed that as many as 41% of those surveyed will be reviewing their strategy around engaging off-payroll workers come April 2020.

The team behind conducted the research as part of an ongoing study into the ways British businesses are preparing for the introduction of IR35, a tax law coming into effect in April aiming to combat tax avoidance by workers supplying services to clients via an ‘intermediary’. Over 1,500 British business owners from a range of different sectors took part in the research, all of whom remained anonymous throughout the study.

Initially, it was found that just under two thirds (65%) of business owners were aware of the new IR35 legislation and have a plan in place to deal with the changes. After being informed of precisely what IR35 is, 41% stated that they will look to review their strategy for procuring contractors into their businesses, meanwhile 11% said they will take more drastic action, by way of decreasing contractors numbers, in many cases restricting the progress on critical projects and other endeavours.

When asked if they’d already switched to outcome-based ‘statement of work’ (SoW) contracts, it was found that one in five (21%) of businesses had done so. However, 45% of business owners admitted to being confused about what action to take next. When breaking down the sectors where business owners are most confused by IR35, those operating within the construction sector emerged as the most confused by the new legislation. Below is a breakdown of the five most perplexed areas polled:

  1. Construction – 56%
  2. Hair & Beauty – 48%
  3. Foodservice– 43%
  4. Travel – 41%
  5. Marketing – 38%

It was finally found that just 32% of businesses felt the changes proposed in IR35 are a positive step in ensuring fair pay and taxation implementation on UK contractors.

Richard Tyler, a spokesperson for, commented:

“The results of this research clearly highlight the need for businesses to gain a much broader understanding of what the upcoming IR35 means, and how it will affect their company finances. Whilst the new off-payroll rules present a level of risk to businesses in the short-term, acquiring services using outcome-based SoW’s is a sensible way of reducing risk. However, if businesses do not adequately prepare for the changes, it may quickly create unexpected costs and issues”.

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