Four IR35 perspectives

The IR35 landscape has changed a great deal in recent years, and in our experience of talking to consultants, contractors and small service business owners, we broadly see four different perspectives when it comes to IR35.

Fighting to be outside IR35, at all costs

For many consultants and contractors, operating inside IR35 is not a place they want to be. As business owners, they find the imposition of IR35 to be “distasteful at best” – it discriminates against them, impinges on their ability to operate as a business and feel it closes the door to entrepreneurial thinking in the service sector. Others find the prospect of “zero rights employment” created by working inside IR35 to be morally repugnant – the full tax burden of employment, but with none of the rights. They’d rather be an employee than be inside IR35. Whatever the root reason, they all share a passion for working hard to be outside IR35.

Many “will do whatever it takes” to operate outside IR35. The vast majority understand and believe in the power of market forces – of supply and demand. They offer niche services, which are in demand across many sectors, and are very good at what they do – they understand the power of their business or personal brand. They know the need for their skills won’t go away. They understand that this gives them better bargaining power, which they plan to capitalise on.

Anecdotally, we also see a strong correlation between this desire and confidence, and knowledge levels of IR35. They tend to have a very good understanding of IR35 and ensure their working practices would stand up to scrutiny.

Stuck in a sector that bans outside IR35

For others, no matter how passionate or knowledgeable they are about IR35, they have skills that are difficult to transfer into other sectors. This limits their short-term ability to overcome sector-wide bans on outside IR35 working, meaning they are reluctantly accepting inside IR35 contracts until the market settles. The most prevalent examples are in the banking and finance sector. However, we have seen many consultants and contractors take niche skills out of banking into other areas – for example, trading systems consultants working in the energy sector, or others who are providing consultancy services to fintech challengers and startups.

A pragmatic view, accepting they’ll occasionally be inside

Others have a more pragmatic view, looking at a contract on its own merits. For example, they would be willing to consider working inside IR35 if the commute was short, or if the daily rate was uplifted sufficiently. They’d rather be inside IR35 than not be working.

Not ready to accept they will be inside IR35

The final cohort of contractors we see are those who, in all likelihood, should have been inside IR35 all along. They generally tend to be in more junior roles or less skilled roles. Many are in a challenging position as they will be forced inside IR35, which will have a significant impact on their take-home pay. Due to the low barriers for people entering this market / an oversupply of candidates, they have very little bargaining power.

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