IR35, the legislation put in place to deter disguised employment tax avoidance, and the effects of the uncertainty over Brexit are combining to cause significant problems for UK businesses and freelancers alike. According to new research by PeoplePerHour.com and TalentDesk.io, which took in the opinions of almost 1200 businesses and freelancers, the combined scenarios have led to a loss of income for both sectors.
Nearly a third (32%) of freelancers reported that the Brexit process is having a negative impact on their business, with 9% claiming that Brexit has already cost their business over £20,000. Over half said Brexit has cost up to £5000 and nearly a third (31%) have experienced financial losses of up to £10,000.
With a recent CRSE report showing that Britain’s self-employed contribute £145bn to economy, if these sorts of losses reported to the survey were experienced by all the UK’s 2.1m self-employed classified as professional freelancers, Brexit has potentially cost Britain’s freelance economy up to £5.1bn to date with a third of freelancers losing an average of £7545.25.
Amongst freelancers, there is a general lack of awareness when it comes to IR35, although many could be directly impacted. Only 35% of those who took part in the study were fully aware of what IR35 might mean for them, and a worrying 79% have spent £0 on getting advice on how to handle IR35 changes.
For business owners, IR35 has thrown up a number of concerns, including 30% of respondents worrying about the impact it will have upon their ability to find new UK clients. While 27% reported already experiencing a loss of income thanks to the new legislation
Of course, IR35 is not the only issue to be causing difficulties for the UK’s businesses just now. The continuing uncertainty over Brexit has left many business owners frustrated and concerned. More than 42% of business owners are estimating that Brexit has cost them upwards of £10,000 already. While 10% of those who originally voted to leave the EU would now vote to stay if a new referendum took place.
Xenios Thrasyvoulou, founder and CEO of PeoplePerHour and TalentDesk.io, explains:
‘Changes in Government policy and legislation happen all the time – and often for very good reason. And there can be little argument that something needed to be done to stop tax avoidance in the UK. But it is slightly concerning that so many businesses are feeling the effects of IR35. And slightly more so, that so few (35%) are willing to trust Government resources and websites for accessing advice on this area, instead engaging accountants or even favouring blog posts and online articles over official sources. We have heard calls from our own community for clarity on the subject, with requests for online tutorials from official sources and clearer advice, we hope the government heeds this request before the roll out next year.
‘And when it comes to Brexit, there’s perhaps not much more that can be said. Few people would have predicted the process to have carried on this long. But whether you’re for or against the concept, everyone must agree that the continuing delays and associated uncertainty are doing little good for anyone. With many of the UK’s freelancers having a strong overseas client base, however, there can be little surprise that many have struggled in recent months. And with the freelance network playing such an important part to the UK’s economic welfare, the government should make providing clarity around IR35 a priority, as well as ensuring freelancers are able to continue with business as usual after Brexit.’