The positive and negative impact of IR35 changes

We all know that IR35 changes are fast approaching. But, are the changes a positive step in the direction of progress? Or are they an unnecessary upheaval to ramp up HMRC profits at the expense of UK contractors and businesses?

If we listen to the government, it’s the former. If we listen to the endless articles and headlines, it’s the latter. In this blog, we look at the negative impact of IR35 changes and weigh up what they really mean for businesses, contractors and of course HMRC.

The positive and negative impact of IR35 changes

The Cost

Of course, with any legislation or process, cost is always going to be the top concern. Whether it be resources or finances, businesses are becoming increasingly concerned over what IR35 legislation changes with cost them. But, should businesses be worried about the cost of IR35?

It is estimated that HMRC stand to profit £1.3 billion revenue by 2024 from IR35 legislation changes. With businesses spending thousands of pounds merely preparing for IR35 changes, it is obvious that this profit is predicted to come from your business. Understandably these are alarming figures for businesses.

However, this needn’t be the case. Yes, businesses have to prepare for the changes, but this preparation needn’t cost the earth. Optimus Shield’s IR35 determination/fee payer service is one of the most competitive on the market, which can mitigate risk to the whole supply chain without racking up a hefty bill. Plus, should there be a HMRC investigation, our IR35 service comes with comprehensive insurance cover and personal protection insurance for the contractor.

Blanket Approaches

The concern over resources and financial implications of preparing for IR35 has led many businesses to turn to blanket approaches. Essentially, a blanket approach assesses all contracts collectively, rather than individually.

Although on the surface this may seem like a positive move from the perspective of your business finances, blanket approaches are far from a practical solution to IR35 changes. Rather than save time, money, and resources, blanket approaches result in extra expenditure for the end client, a drain on contracting talent, opens up the contractor to historic HMRC investigations and damages the company reputation.

The fact that more than half of UK businesses are planning a blanket approach to IR35 changes due to a supposed lack of time to assess contractors individually is, to put it mildly, a terrifying effect of off-payroll working rule changes that stands to negatively impact contractors and businesses alike.

What is especially frustrating about the shift to blanket approaches is that they needn’t even be a considered as a potential approach, let alone be seen as a necessity. Not when there are bespoke, insurance backed IR35 determination/fee payer services out there that will mitigate risk to the whole supply chain at a much smaller cost to finances, reputation and talent.

Contractor Shortage

With businesses turning to blanket approaches it perhaps comes as no surprise that there are rumours circulating of a contractor shortage.

As we know, upcoming IR35 changes are estimated to have an impact on over 900,000 UK based limited company contractors working in the private sector. Meanwhile, the Office For National Statistics recently reported that there was a 2.4% drop in IT contractors in 2018 compared to the previous year.

Such stats are concerning for businesses as they risk losing their top talent, putting projects at risk, and disappointing clients. However, if businesses adopt an IR35 policy where contracts are individually assessed then a contractor shortage ceases to be a concern.

Rather, contractors will seek out businesses where their IR35 status is given the due attention it deserves and they are given full personal protection insurance in the event of an HMRC investigation on said contract. Therefore, when using a bespoke IR35 determination service, businesses could see a surge in top contracting talent rather than a decline.

The Human Impacts

Last but certainly not least, is the human impact of the IR35 changes. With ‘four out of ten businesses…considering phasing out contractors when IR35 legislation is introduced’ our concern immediately goes to the contractors who risk facing unemployment and work shortages. 

Add to this the worry and stress that IR35 and business preparations, or lack of them, are causing contractors and it’s no wonder that we are seeing an increase in the number of sorry tales from contractors who have left the contracting world, or are suffering with the mental health implications of post-IR35 uncertainty.

Again, by assessing contracts individually, and offering personal protection insurance to the whole supply chain, businesses can minimise the stress and worry that IR35 changes are putting on contractors, instead making them feel valued and secure within their contracts.

It is clear that there are a whole host of supposed negatives of IR35 changes which are causing a considerable amount of uncertainty, worry and stress amongst businesses and contractors alike. As with any large changes, this is of course to be expected. However, by adopting a bespoke IR35 service that is insurance backed and mitigates risk to the whole supply chain, your business can turn the negatives of IR35 changes around, minimising the expense of the changes to off-payroll working rules and maintaining your top contracting talent as well as your competitive edge in the marketplace.


Talk To Us Today To Learn More

Optimus Shield is the result of heavily invested research and development to tackle the issues now facing the private sector due to changes to the IR35 legislation being rolled out in April 2021.