The ‘IR35 Road Ahead Survey’ conducted by IR35 Shield in December also points to a surge in tax avoidance schemes, operating “under the guise of umbrellas and payroll companies”, the survey narrative says, leaving 74% of contractors unable to distinguish between a compliant umbrella company and a tax avoidance scheme.

Illustrating the potential for compliance fraud, the survey results show that 60% of respondents regularly or occasionally receive marketing from schemes offering take-home pay of circa 85% and only 43% of respondents reporting that they are confident they could perform their own tax calculation to make sure it is correct.

“Government efforts to tackle these schemes clearly aren’t working,” the results narrative said. For instance, as of April 2020, agencies are required to provide workers with a Key Information Document (KID), designed to offer transparency around aspects such as pay. However, 86% of respondents said their agency had not provided them with a KID and 67% weren’t aware of what a KID is.

IR35 Shield CEO Dave Chaplin said: “Following the April 2017 public sector implementation, we also saw a plethora of third-party payroll companies enter the unregulated umbrella market, which resulted in 6,000 contractors unwittingly becoming involved in dodgy tax avoidance or evasion schemes.”

While 62% of respondents said they had been invited to work via an umbrella company, 61% claimed they would not respond to an advert for an ‘umbrella only’ contract. Only 8% said they would be happy to use one. 

Thirty-six per cent of respondents have been invited to work via their agency’s payroll, but 44% of respondents said they would never work via either agency payroll or umbrella. 

Other survey results include:

• 52% of in-work contractors are yet to be assessed
• 23% of in-work contractors say their client has imposed a blanket ban on the use of limited companies
• 65% of contractors will avoid ‘inside IR35’ contracts
• 69% will increase their rate for on-payroll assignments
• 72% will quote separate rates for contracts depending on IR35 status
• 75% believe HMRC’s controversial Check Employment Status for Tax (CEST) tool is inaccurate, and only 3% trust the tool.

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