Spotlight on IR35.
With increased reports of HMRC investigations, how is the risk appetite evolving with contractor IR35 statuses?
Spotlight on IR35.
With increased reports of HMRC investigations, how is the risk appetite evolving with contractor IR35 statuses?
The Defence & Security market is evolving in two distinct directions — and it matters more than ever.
Large organisations with a risk adverse approach
99% of contractors determined Inside IR35 and no real scope for a meaningful appeal. (Many of these organisations are now procuring “SOW” contractors via consultancies to circumvent this).
Smaller to Medium sized organisations and Consultancies
Clear policy and procedure to support role by role determination and Outside IR35 working practises with many contractors working Outside IR35. Governance levels vary by organisation.
Typically, skilled trades, technicians and roles in manufacturing and production are determined Inside IR35.
Across our sample size of over 1000 contractors in the Defence & Security sector:
Typically, skilled trades, technicians and roles in manufacturing and production are determined Inside IR35.
Across our sample size of over 1000 contractors in the Defence & Security sector:
Contractors operating outside IR35
…by removing trades, technicians and manufacturing contractors it jumps to
…by removing 5 larger organisations from the sample, it increases to
Source: Matchtech’s STEM placements in the Defence & Security sector
But what impact does your IR35 approach have on your costs, value for money and talent attraction?
Yes it’s pushed rates up but not as you’d expect…
Many Outside IR35 contractors are earning the same, if not more than those operating Inside IR35. For skills where opportunities exist on an Outside IR35 basis, the top contractors simply won’t consider Inside IR35 contracts. IR35 status also has a huge impact on whether contractors will consider working onsite/staying away from home, due to the significant differences with how expenses can be claimed.
The market is no longer just about the rate. Impact from IR35 + location expectations could easily be shown as:
Source: Matchtech’s STEM placements in the Defence & Security sector
Some organisations are simply missing out on the best talent because of their approach. It would be prudent to highlight that organisations in the red box will be achieving the lower value for money as it’s likely that their shop window for contractors will only attract those who are unable to secure work at organisations with a more attractive proposition. This may lead to increasing rates further to secure better talent but may diminish value even further.
