Research from IR35 specialist, Qdos, has revealed that 70.51 per cent of freelancers/contractors secured engagements that sat outside of the IR35 legislation in 2024 – a figure that has doubled since the introduction of the off-payroll working rules in the private sector in April 2021, which saw many of these workers placed onto the payroll of their clients.
As part of Qdos’ annual Contractor Survey, 925 contract workers shared their view on the biggest issues shaping the flexible labour market – from IR35 and the wider tax landscape to business confidence.
The headline figure of more than 7 in 10 contractors being able to operate outside IR35 is, according to Qdos, a sign that “the tide has turned” following the legislative reforms introduced in the private sector in 2021 and public sector in 2017. For instance, soon after the roll-out of the private sector changes in April 2021, only 35 per cent had been engaged outside of IR35.
However, the fact that this figure was higher in ‘23 (75 per cent) and ‘22 (80 per cent) serves as a “wake up call” to businesses. By opting not to engage genuine contractors outside of IR35, businesses absorb PAYE taxes. Ahead of the increase to employers’ NI on 6th April, firms “needlessly forcing” contractors to work on the payroll will see the cost of hiring increase even more.
Additionally, the research showed that while most (58.74 per cent) contractors said securing outside IR35 engagements was “difficult”, the majority (61.5 per cent) are confident they will be able to work in this way going forward.
When it comes to the year ahead, contractors are overall (54.79 per cent) confident about their future prospects, which Qdos said suggests “cautious optimism” held by these workers.
“After IR35 reform, the rhetoric was that contracting had died a death,” said Qdos CEO, Seb Maley, “And while the changes certainly create big challenges, both for contractors and businesses, this research suggests that the tide has turned, painting a different picture – one of cautious optimism about the road ahead.
“The good news is that most contractors are now able to secure roles outside IR35 and confidence seems to be returning to this vital sector of the workforce, after a turbulent few years. This can only be a positive thing, for business and the wider economy.”
Maley also noted that these workers have pointed towards a shrinking pool of opportunities where they can operate outside the clutches of this legislation. “Above all else,” he said, “this is a wake up call to businesses, as they continue to grapple with talent shortages.
“There’s plenty of work to be done to minimise the ongoing impact of IR35 reform. With employers’ NI rising imminently, the cost of forcing contractors to work on the payroll irrespective of their true IR35 status will become even more pronounced.”
