The majority of workers using affiliated companies are not seeing profits

According to a survey, almost two-thirds of self-employed people working through affiliated companies do not believe there is any benefit to doing so.

The use of affiliates that act as payroll agents between supply chain contractors and customers has increased significantly since then. IR35 reform Introduced in the private sector in April 2021.

according to HM Revenue and Customs Agency started talks (HMRC) In December 2021, the number of contractors working through affiliated companies increased significantly from about 100,000 in the tax year 2007-2008 to five times that number now. This means that just over one-third of all self-employed people operate through affiliated companies.

The annex to the lords’ consultation report acknowledges that the “affiliated company model” became widespread after the introduction of the IR35 tax avoidance rule at the turn of the millennium, but the cause of the recent increase in the number of contractors is not so clear. Not mentioned in. ..

However, according to a survey by the Independent Professionals Association and the Self-employed (IPSE), 7 out of 10 (69%) of the workers in the affiliated companies have been working through the affiliated companies since the IR35 was turned off. It states that the client is claiming. Salary working last year.

This is whether the reform will allow medium to large private companies to tax the contractors of the limited companies they work for in the same way as office workers (within IR35) or off-payroll employees (outside IR35). It has brought about a change that makes the decision responsible. ).

Recognizing that reforms significantly increase administrative burdens and compliance costs, many companies within the reworked IR35 rules have fine-tuned hiring policies to minimize the disruption that changes bring to their businesses. I adjusted it.

Employment ban

In some cases this is Enforcement of employment prohibition prohibiting the use of contractors of limited companies Instead, he favored the use of freelance workers who provide services through affiliated companies.

An additional 63% of IPSE respondents said they had some options, but the range of affiliates they could choose from was limited, and 5% said they couldn’t fully select affiliates and were assigned to them. ..

Despite the recent increase in use by affiliates, an IPSE survey found that 7 in 10 (74%) freelancers were “dissatisfied” with work through affiliates, and half were “extremely dissatisfied.” It turned out to be.

As for why they were dissatisfied, 80% cited the fact that the employer’s national insurance and, if applicable, apprenticeship legal liability must be covered by a daily reduction.

An additional 70% believe they have lost their independence and ability to work since joining a company under their umbrella.

“The fundamental problem here is that people are being forced into unwanted pseudo-employment relationships,” said Andy Chamberlain, IPSE’s head of policy. “The IR35 change was made a year ago, pushing thousands of people who proudly consider themselves self-employed to their affiliates at a disadvantage.

“Today’s report was shared with the government following a recent request for evidence. To workers at many affiliated companies who could not understand the benefits of working through them with us. I hope you listen, “he said. “In particular, I hope they make recommendations to prevent freelancers from being forced to work for affiliated companies that limit their independence and do not give them real profits.”

February 2022, Following the latest research on IR35 reformHouse of Peers Economic and Fiscal Bill Subcommittee Prompted to the government Increase the pace of commitment to develop statutory regulations for affiliated companies.

A subcommittee survey confirmed that the introduction of policies such as employment bans in response to the IR35 reform has increased the number of contractors hired through the installation of umbrellas. Spread of “illegal affiliated companies” in the market..

“The Sub-Committee is very concerned that the off-payroll rules encourage the insertion of unwanted intermediaries into the supply chain, increasing the costs and opportunities for’illegal’operators.” Stated. “We believe that effective action requires more emphasis on worker protection.” The majority of workers using affiliated companies are not seeing profits

Back to top button