Startup numbers fall after IR35 clampdown

HMRC IR35The formation of new companies incorporated in the UK dropped in 2017, according to data published by Companies House. Some 622,713 new companies were launched last year, down from 646,703 in 2016, representing a drop of around 4%.

Commenting on the figures, the Centre for Entrepreneurs (CFE) claimed the decline is a result of the government’s tax clampdown on public sector contractors.

Changes to rules surrounding IR35 came into effect in April 2017, which were intended to stop work which HMRC regarded as “disguised employment”. This has led to a decrease in the registration of new businesses, which the CFE says had previously been “distorted” by high numbers of contractors.

Matt Smith, director of the CFE, said:

With business registrations increasing for nearly a decade it is not surprising to see the record streak come to an end.

While the tax clampdown is responsible for most of the drop, there is evidence that formations have fallen more than expected.

To boost startup figures, the government must return to championing entrepreneurship and supporting entrepreneurs.

Contact us for advice on any aspect of IR35.

You might be interested in...

  1. Will Haselden's "Accountant of the Year"

    06 May 2026

    Will Haselden awarded Accountant of the Year

    Will Haselden, Partner from our TC Leonherman (South Manchester) office won 'Accountant of the Year' at the 2026 Insider North West Young Professionals Awards.

    Learn more

    Will Haselden awarded Accountant of the Year
  2. New Tax System Changes for 2026/27

    01 May 2026

    New Tax System Changes for 2026/27

    As we've now entered the new tax year, we've outlined below how to prepare for the new tax system changes for 2026/27 and why planning ahead for your tax return in January 2027 is advised. Read our blog for an overview of the upcoming changes.

    Learn more

    New Tax System Changes for 2026/27
  3. When To Review Your Business Structure

    28 Apr 2026

    When To Review Your Business Structure

    While you can’t control geopolitical tensions, economic volatility, shifting regulations, you can control how your business is structured to respond to them

    Learn more

    When To Review Your Business Structure
  4. Increasing the Value of your Business

    28 Apr 2026

    Increasing the Value of your Business

    Market volatility and deal pace are changing how SME owners view risk and reward. Read our insights on value creation in today’s M&A market.

    Learn more

    Increasing the Value of your Business
  5. Building a Better Business with an Outsourced Finance Function

    27 Apr 2026

    Building a Better Business with an Outsourced Finance Function

    Compliance matters, but most commercial problems do not arrive neatly at month end. Modern finance supports decisions as they happen, not just records them afterwards.

    Learn more

    Building a Better Business with an Outsourced Finance Function