Fall in freelance IT contractors

New figures from the Office for National Statistics (ONS) show that the number of freelance IT contractors working in the UK fell by 2.4 per cent last year compared with 2017, which was the first fall in five years.

There were 121,989 freelance IT contractors across the UK in 2018. However, following the impact of IR35 reforms in the public sector, many contractors have been moved into permanent roles or umbrella companies.

Under IR35, contractors working alongside PAYE (pay as you earn) colleagues pay similar income tax and national insurance contributions (NICs), although they are not entitled to the same holidays or sick pay benefits.

In April 2017, the Government reformed the rules in the public sector, shifting the responsibility for determining employment status from workers to the public authorities, and the same rules will apply to the private sector from April next year.

Many industry professionals have blamed the changes for several delays to public sector IT programmes due to freelancers leaving. Other industries have also seen an impact on how they engage freelancers and contractors, as many banking groups have recently announced that they will no longer take on contractors who provide their services via a personal services company (PSC), limited company, or another intermediary unless they work on a PAYE basis.

Critics claim that the changes will mark the end of contractors, but others insist that this will depend on what stance HM Revenue & Customs (HMRC) takes. As one commentator pointed out, HMRC taking tough enforcement action would likely have “a chilling effect” on the use of contractors.

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