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Accounting Web's Contractor Webinar

How hard will contractor firms be hit?

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I was just listening to the contractor accountancy webinar done by Accounting Web.

The elephant in the room seemed to be the new off paroll rules for the private sector.

I was surprised that this wasn't really discussed.

I can't understand how these type of firms will be able to maintain their current client numbers and current number of employees given the new off payroll rules.

I would estimate these firms will lose around 50% of their accountancy revenue and consequently will probably need to make a similar proportion of redundancies too.

The whole webinar felt a bit like the start of the Titanic movie, with no one acknowledging that the ship could be damaged and sink.

Surely these contractor firms will go the same way as Blockbusters, Kodak, and many shops on the high street.

Am I the only person who felt like the webinar was a bit bizarre?

No real mention of how they have managed coronavirus schemes, furlough, etc too.

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By Chris Maslin
18th Nov 2020 13:23

I wasn't on the webinar, but as what might be termed a "contractor firm" thought I'd chime in with our experiences.

Yes, we're losing a lot more clients than we're used to. 1+ years ago, typically we'd lose perhaps 0.5% of clients per month. Could be due to emigration, taking on a permanent role, or retirement. More recently it's more like 2% of clients per month. This is predominantly due to the IR35 changes pushing people into employed roles, but also quite a few moving to the EU due to Brexit.

However we're still taking new clients on at broadly the same rate we always were (perhaps IRO 1.5% of our client numbers in new clients per month). So whilst historically we were growing fairly rapidly, more recently we're seeing a modest decline overall...but nothing as drastic as you suggest.

Contracting will continue. There will still be UK based outside IR35 roles in big corporates. Contract roles for small clients still follow the old rules, where many contractors will be happy their working practices are safe. Also outside UK roles will follow the "old" rules, and in practice are fairly safe as it's hard for an overseas client to exert any significant control.

Plus the freelancer end of the market is still going strong (some hit worse than others by Covid of course). By freelancer I mean the one person businesses that have dozens of clients at any one time.

Also specific to us, we have a sister company MVL Online which does liquidations for cash rich solvent cases. So a bit like selling ice creams and umbrellas, whilst Maslins has been suffering, MVL Online is having by far its best year ever as lots of high earning Ltd Co contractors look to close. That will inevitably be short term, but it's been a big help.

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Replying to Chris Maslin:
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By GR
18th Nov 2020 18:21

Thanks

I guess my 50% slash relates more to the next 12 - 24 months post April 2021 (rather than now).

As you say, I too currently haven't lost too many clients thus far. However right now I have a few zombie ltd company clients who are either not trading because the contractor has gone permanent, umbrella or claiming furlough. I suspect these zombie clients will close sometime next year.

The issue I see is that although contracting will continue overall the pool of ltd company contractor clients will drop from 200k down to 100k in the long term due to off payroll, clients using FreeAgent to do their own accounts, Brexit, coronavirus, etc. Consequently many contractor firms will be faced with downsizing and making redundancies.

I guess JSA will just close their various offices in Scotland (Accounts Net), Leeds (Clever Accounts), and Canary Wharf (K&B Accountancy Group), and just transfer whatever clients are left into their Watford office.

I have referred one of my clients to MVL Online. Annie was excellent- super quick at replying to my initial emails. I haven't been bothered by MVL Online (not even once)- they offer a completely hassle-free service which is really good. I have asked my client for feedback and he has no complaints (which is really surprising because he has high standards).

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