Will we see another “Contracting” boom in the UK with IR35 “repeal”?
With most of the UK still trying to make sense of, what seems like some pretty rudimentary, “back of a fag packet” economic policy, there did seem to be a few interesting announcements that could see more work for accountants; ditching of National Insurance increases and scrapping proposed Corp Tax increase grabbed the main news headlines but many accountants were pleasantly surprised to see IR35 reform introduced in 2017 and 2021 to be repealed!
Having worked at an accountancy firm that specialised in single person Ltd companies / “PSC” management, I know these types of operations have been the ongoing target of HMRC for over 5 years with several high-profile cases involving the likes of Kaye Adams & Adrian Chiles @ the BBC as well as a host of other presenters and celebrities.
Despite those losses from HMRC, thousands decided that running their own Ltd company was no longer worth it and the number of PSC “Contractors” working in the Public Sector (2017) dropped significantly and then again in the private sector (2021) with thousands of workers needing to go “on-payroll”. The main change being the responsibility for deciding if a contract was inside or outside IR35 was decided by a woeful HMRC app (ironically developed by IT Contractors) never captured the nuances of certain types of work and some employers decided on an ultra-safe blanket ban on using PSC contractors forcing many into the murky waters of Umbrella companies.
I have watched as Contractor Accountancy firms branched out and diversified and largely built more sustainable businesses that were not ultra-reliant on contractors.
So now to breakdown this “Repeal”, what the government appears to be saying is not that we can all go back to the good old days of the ’90s and ’00s of pretty much unchecked PSC contracting; all they are saying is that the responsibility to decide if a contract falls inside or outside IR35 will again fall to the contractor. Meaning you (the Ltd company director) are pretty much accepting liability when HMRC, not the owners of the company you are working for, meaning they are not protected.
It seems though, the contracting community see this as an opportunity to make up lost ground; a poll run by a well-known UK contracting specialist to their LinkedIn following of thousands showed that 77% of those that were forced onto payroll or to work with an Umbrella company n recent years plan to do the exact same thing.
This extra work and extra revenue from (usually) quite easy-to-manage, intelligent, tech-savvy clients will likely be a welcome boost for accountants who will no doubt lose a number of clients over the winter, especially if we don’t manage to sort out the ongoing energy crisis, many businesses may simply cease to be viable.
Are you expecting to see the number of PSC contractors on your books rise from April next year?
Now is the time to start building your capacity, onboarding, training and preparing if so!