Almost two-thirds of contractors have turned down work because it was deemed inside IR35, according to new research from IPSE and Qdos.
The survey of 505 contractors found that 63% had rejected an offer of work in the past 12 months solely because the client had assessed it as inside IR35.
That figure is up from 52% in the previous year’s survey – a notable rise despite a tougher contracting market.
Contractors still walking away from inside IR35 roles
One in four respondents (25%) said they were currently out of work, while 63% said they felt less confident about securing outside IR35 opportunities over the next 12 months. Yet many are still prepared to walk away from roles they believe have been incorrectly classified.
The findings, five years on from the private sector off-payroll reforms, highlight how IR35 continues to create significant friction between clients and the flexible workforce.
Under the rules, responsibility for determining employment status sits with the client.
Roles assessed as inside IR35 typically require contractors to work via an umbrella company, paying employment taxes while receiving few or no associated employment rights, such as sick pay, redundancy protection, or unfair dismissal safeguards.
For many contractors, the combination of lower take-home pay and lack of benefits makes inside IR35 engagements unappealing.
IPSE: “Unnecessary barriers”
Vicks Rodwell, Managing Director of IPSE, said the rules are undermining businesses’ access to specialist talent:
“If you’re a business, the appeal of working with contractors should be that you get quick and flexible access to specialist talent. But that’s being undermined by the IR35 rules. They create unnecessary barriers on both sides of the hiring process.
“Businesses are struggling to fill contract roles because highly skilled contractors are walking away from opportunities that they believe are being wrongly assessed as inside IR35.
“It’s tough enough out there for people looking for work without making flexible hiring harder than it needs to be.”
Five years after the reforms
Introduced in the public sector in 2017 and extended to medium and large private sector organisations in 2021, the off-payroll working rules remain one of the most contentious issues facing contractors. Read our IR35 timeline.
While HMRC maintains that the reforms improved compliance, critics argue that risk-averse clients responded with blanket assessments or a reduced use of limited company contractors.
Exclusive: Qdos CEO Seb Maley
Speaking to IR35 Update, Qdos CEO Seb Maley said many organisations still need to take a more considered approach to employment status decisions.
“Hiring organisations should ask themselves if the shoe was on the other foot, would they accept a contract inside IR35?” Maley told us.
“In the years since the reforms, we have seen a gradual improvement – by that I mean fewer firms blanket-banning contractors and more organisations taking a fair, compliant-led approach to engaging contractors. However, clearly this is something that more engagers need to bear in mind, particularly given that so few genuine contractors are willing to operate inside IR35, and understandably so.”
Maley added that businesses risk losing access to highly skilled talent if they continue with an overly cautious approach.
The survey data suggests that while outright bans may have become less common, concerns around employment status determinations remain deeply embedded in the contractor market.