IT freelancers flee U.K.: Survey

IT contractors are continuing to leaving the UK because of the uncertainty created by legislation such as IR35, according to new research.

The IR35 tax rule was created to eliminate a loophole by which IT contractors could effectively work as full-time employees of one of their clients, while being taxed at lower contractors' rates, but confusion has arisen over which contractors should be covered by the rule.

A poll of freelance IT staff by contractor networking group Shout99 found that almost half have either already left the country or are waiting to go.

A total of 37 per cent are waiting to leave, compared with 32 per cent in a similar study three years ago, and another eight per cent have already gone to Germany, Holland, Switzerland and the US.

The figures are similar to the original survey in 2000, and in fact the number prepared to stay in the UK has also risen, up one per cent to 44 per cent in the 2003 survey.

But the climate in which contractors operate in is very different, with IR35 now in full effect and a continued downturn in the IT sector that has seen many companies slash contractor numbers.

Susie Hughes, spokeswoman for Shout99, said that despite the fears over the imminent introduction of IR35 when the original poll was conducted, the IT market was at least still buoyant with a greater availability of contracts and higher rates.

"But the uncertainty of operating as a freelance business continues to cause problems for many businessmen and women as they have to contend with a depressed market place, increasing red tape, lower rates and new measures which bring added uncertainty such as outsourcing, fast-track visas and Section 660 -- the business tax on family and friends," she said.