Research Reveals Potential Impact of IR35 on Construction

RESEARCH INTO the long-term impact of IR35 shows that more than half of construction managers are concerned about how the legislation will affect its workforce.

The research highlights that 56% of managers believe the changes to tax legislation will leave them with a significant skills shortage. This is because end clients could veer on the side of caution when recruiting contractors, according to the study from recruitment experts, Search Consultancy.

Impact of IR35

The new IR35 tax rules came into effect on 6 April 2021. Responsibility now falls on the end client to determine whether contractors are self-employed or employed for tax purposes. Confusion surrounding the legislation means end clients are taking a conservative approach to hiring contractors. This could significantly reduce the talent pool available to them.

With 83% of managers within construction believing the industry already suffers from a skills shortage, IR35 could worsen an already difficult situation.

Losing Top Talent

Paul Kynaston, managing director of construction & property at Search, said: “It is impossible to determine the impact changes to IR35 legislation will have on the industry just yet. However, the concern we have with companies going down the route of a low risk blanket ban on personal services companies means there could be restricted access to particular unique skill sets. Workers could also be panic pigeonholed into PAYE when they might legitimately continue to operate through a PSC.

“IR35 needs to be managed with balance against other risks, such as losing top talent in the industry, or finding that a company’s approach to IR35 sends PSC contractors in the direction of the competition.”

To support businesses and workers unsure about whether IR35 affects them, Search Consultancy has curated advice from tax experts.