The upcoming changes to the IR35 UK tax law is projected to have an outsize impact on legal freelancers and the companies that employ them. Coming into force on 6 April 2021, the updated IR35 will establish whether freelance contractors are actually “disguised employees,” and will seek to impose a tax liability on companies that employ such flexible workers.
This is a particular concern for the legal industry because many businesses have implemented agile legal resourcing models over recent years. These companies work with self-employed contract lawyers or lawyers who work for “Alternative Legal Service Providers” (ALSPs), in order to dynamically manage their department and adjust their capacity to their fluctuating workload. Currently, 40% of UK corporations use ALSPs as a source of specialized legal services from licensed lawyers. Despite the centrality of flexible talent to the modern economy, as of late 2019, 33% of private sector organizations which engage temporary contractors are still unaware of the changes IR35 will bring.
IR35's updates will result in significant time and cost for any businesses using legal contractors. It will require the auditing of any non-permanent workforce and the cost of operating PAYE taxes. In response, businesses may move away from using legal contractors and revert to relying on law firms and their secondees, potentially incurring higher costs and less flexibility.
Legal teams may also see a reduction in available flexible legal talent, given the changes IR35 will make for legal contractors. Those who can find work in this hyper-competitive new freelance market could be required to pay as much as nearly 25% more tax if they are deemed to be “disguised employees” of the company with which they are working.
“At least one of the major investment banks has already begun to use fewer contractors,” noted Milan Patel, an Axiom Lawyer who previously worked as a freelance legal contractor.
Whether you’re a business that wishes to maintain an efficient and responsive legal resourcing strategy, or a legal contractor who enjoys the flexibility of working with a variety of in-house teams, this guide will help you navigate IR35’s challenges. At Axiom, flexible legal resourcing has been at the core of our business for over 20 years, and many of our UK-based lawyers are employees of Axiom, enabling businesses to access flexible legal talent within the bounds of IR35. We have created this guide to help companies and legal professionals think strategically about how changes to IR35 could have an impact on the legal industry.
In this guide you’ll find:
- Axiom’s perspective on how changes to IR35 may impact the legal industry
- How to adopt an IR35-compliant, agile resourcing model
- How to build a flexible, in-house career after IR35
Download Axiom’s guide to the updated IR35 now to better understand these challenges and how you can reimagine your legal department and legal career in light of the upcoming regulatory change.
