TaxPersonal TaxContractor exodus as IR35 bites

Contractor exodus as IR35 bites

Anti-IR35 contractors, the Professional Contractors Group, claims IR35 is stifling the UK technology industry forcing hundreds, possibly thousands of self-employed contractors to flee the UK.

According to the PCG, contractors claim it is no longer profitable to work under IR35 where they are taxed on the gross amount they bill clients, and forced to pay the same tax as someone who is in full-time employment, but without benefits such as paid holidays and sick pay.

PCG spokesperson Susie Hughes said some 300 people have told the PCG they have left, or are leaving the UK.

‘For every person who has responded and told us they are leaving there’s probably 10 or 20 more that haven’t,’ explained Hughes.

‘IR35 is a huge problem for entrepreneurs working in cutting edge technology,’ Hughes said. ‘The government has effectively stifled what was a booming part of the economy.’

One London-based contractor who asked not to be named, told Computing that IR35 is forcing contractors to find new careers because they can no longer afford to carry out contract work.

‘I’m sticking it out, but literally hanging on by the fingernails. I have to now spend a large proportion of my time not being a programmer, but being an employment status expert,’ he said.

He is now looking into setting up a company of his own, away from IT consultancy and the constraints of IR35.

Steve Padraig, director of PowerCode Development, a company that specialises in providing IT contractors is changing its focus as a result of IR35.

‘Due to the unsettling nature of both working abroad and not knowing where I stand regarding contracting in the UK as a result of IR35, my company is in the process of restructuring its business to be completely outside of IT,’ Padraig said.

‘Is very sad that we are moving away from IT but we do need a level playing field to compete fairly with our competitors,’ Padraig continued.

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