The Impact of IR35 On the Construction Industry

IR35 changes that came in place last year have had a significant impact on the construction industry. In this article we look at what impact this has had and what to do about it.

Key Takeaways

1. IR35 was brought in to tackle tax avoidance through disguised employment
2. Changes in April 2021 increased the tax risk for those involved
3. The changes have led to a reduction in available contractors leading to employers looking for alternative options

What Is IR35?

IR35 was originally introduced in 2000 with the aim of preventing businesses for gaining a tax advantage by disguising employment as a B2B arrangement. In April 2021, controversial new changes were brought in that made the hiring organisation responsible for making highly complex tax-status decisions. This change had a big impact on contractors who worked through their own limited company, and it has been a huge headache for those who hire them too.

How Has IR35 Impacted the Construction Industry?

Like many other industries, the construction industry took a bit hit when these changes were brought in. Research showed that more than one-third of freelancers have quit contracting since the changes took effect. For contractors in the construction industry, IR35 led to the number of self-employed workers dropping by 10 percent to the lowest level in 18 years.

There have clearly been other contributing factors to this drop such as Brexit and the pandemic but the impact of IR35 cannot be underestimated. The new rules that were brought in created a tax risk for any company that accepted the self-employed status of a worker with many companies either cutting ties or deciding it is safer and easier to either hire directly or engage workers through payroll companies.

The end result is a draining of the pool of talented self-employed workers in the construction industry and companies looking for new ways to fill this void.

How To Deal with IR35 Changes

The simplest way to work around these new changes is to look to employ directly. There is a growing number of candidates available who are no longer working in a self-employed status. This means that companies are competing to hire the best talent directly and that is where ecruit comes in.

Our Advertiser service means we can create an optimised job advert and post it on all the top job boards, all for one low cost. We also include access to an ATS meaning you can manage your candidate talent pool and handle the recruitment process easily and efficiently.

Our head-hunter service also allows you to attract passive candidates who may not be actively looking for a role but who fit the criteria you require.

Book a 5 minute demo with our team to find out more.