Around two-fifths of businesses say reforms to IR35 have had negative financial impacts on their business, according to research by the Association of Independent Professionals and the Self-Employed (IPSE).
Of the 501 businesses surveyed, 28% had decreased the number of contracts they gave to freelancers since the changes took place.
The report also states that since the changes have come into effect, more than a third of freelancers (35%) have closed their business.
IR35 legislation was designed to ensure that firms taking on freelance contracts, and freelance workers themselves, weren't operating through intermediaries in order to avoid paying tax.
The reform, implemented in April 2021, moved the responsibility of determining employment status from the worker to the client. The change was met with criticism from many for its complexity.
Although the reform states that companies need to assess a freelancer's employment status on an individual basis, one in five businesses made a blanket assessment and decided all their contractors were within IR35.
Derek Cribb, CEO of IPSE, said:
"Businesses have long relied on freelancers to provide additional expertise and support. The changes to IR35 in the private sector in April 2021 have made it harder for them to hire contractors and has therefore made it even more difficult for them to grow during these turbulent economic times.
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