Most contractors still in IR35 dark

In spite of all the attention IR35 has attracted over the last year, a survey by Bristol IT recruitment agency, Resource Matters, suggests that many IT...

In spite of all the attention IR35 has attracted over the last year, a survey by Bristol IT recruitment agency, Resource Matters, suggests that many IT contractors are still unaware of how exactly to prepare for the Inland Revenue's new tax legislation.

According to the agency's recent website poll, approximately one third of the 580 respondents surveyed expressed an intention to withdraw from contracting as a result of the new rules.

Some 57 per cent admitted to having taken no action whatsoever to prepare for IR35 while only 42 per cent had sought professional advice on the matter. Darren Green, financial director of the agency, admitted to being concerned about the potential impact on the employment market from "poor information" and said he feared contractors withdrawing from the market "before taking good quality professional advice".

"The situation is tough for contractors because the definition of self-employed status is open to so much interpretation," says Green. "We strongly advise all our contractors to take advice from an accounting company that specialises in the IT industry."

Recruiters were also targeted in the poll, with 60 per cent of those surveyed claiming their agencies had so far "done nothing to help". In only 39 per cent of cases did respondents say their agency had produced a contract that took account of IR35.

Asked therefore what agencies can do to help contractors minimise the impact of the legislation, Green replies that recruiters should "take the initiative" and provide contractors with detailed information about the legislation, its obligations, implications and criticisms. A guidebook, such as the JSA produced 'Contractor Guide to IR35' will prove most useful, he says.

Also, Green believes agencies should seek to formulate contracts that take account of the new rules and reflect self-employment, providing this is the true working relationship between the contractor and client.

"At Resource Matters, we've produced a Contract Supply Agreement for those assignments that demonstrate true self-employment, and already three quarters of our contractors have requested it," he adds. "It's perhaps a sign that the Government's expectations may be over ambitious. Come the end of the tax year, IT contractors may not be prepared to give up their self-employed status without a fight."

This was last published in June 2000

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