Half of firms yet to prepare for IR35 changes

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The IR35 changes take effect in April 2021 Image: Shutterstock

More than half of organisations that use contractors are yet to prepare for changes to the off-payroll working rules that come into effect in April 2021.

Originally set for introduction in April 2020 but delayed to reflect the additional pressures businesses were under because of the pandemic, the IR35 rules shift the responsibility for determining a worker’s employment status for tax purposes onto the private sector organisation contracting them.

According to a survey of 3,601 contractors by assessment tool IR35 Shield, 52% are yet to be assessed for compliance with the new rules.

Twenty-three per cent of those in work say their client has imposed a blanket ban on limited company contractors,

Fifty-seven per cent said at least half of contractors would likely leave their client due to IR35 and just 32% are confident that they will remain with their current client after April 2021, which may create resourcing issues for businesses.

Dave Chaplin, CEO of IR35 Shield said: “We have just a few months until off-payroll takes effect in the private sector and it seems that half of the market is leaving compliance until the very last minute. This is likely to cause some severe repercussions for hirers and contractors.

“Our survey tells us that those firms that use CEST [HMRC’s tool for checking a workers’ tax status] to conduct status assessments or apply blanket rules to negate their compliance obligations will encounter considerable disputes and recruitment struggles with many going to the back of the queue when contractors are deciding on their next contract.

“Blanket bans on limited companies are an expensive way for firms to hire less talented professionals, whilst handing a competitive edge to their competition. Firms need to realise that if they apply best practice and with the correct contracts in place, they can continue to hire the best contractors with confidence.”