New research by qdos shows that over half of firms may not be preparing for IR35 changes in April 2021. This comes after over half of contractors stated that their end client had not yet contacted them about the off-payroll working rules, despite change being only three months away.

The current rules state that IR35 does apply if a worker/contractor provides their services to a client through an intermediary. However, the worker would be classed as an employee if they were contracted directly.

If IR35 does apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC. The Government have stated that these rules are to ensure that workers pay broadly the same tax and National Insurance contributions as employees.

However, from this April, organisations will be expected to make the final say about whether IR35 rules apply once they receive an individual’s service. In addition, the liability will be transferred from the contractor to the fee-paying party in the supply chain, which is either the end client or the recruitment agency placing the worker.

When analysing the figures closely qdos found that, of those who have had their contract assessed, over half (56 per cent) have been determined as outside IR35 whilst 44 per cent have been deemed inside the legislation.

So what action do you need to take?

Firstly, for every existing contractor –as the end-client you must have both assessed the contract, and conducted a Status Determination Statement (SDS), outlining their perceived IR35 position.

You’ll also need to consider your communication strategy with contractors.  Contractors want reassurance that their IR35 status will be assessed fairly by a client or that their agency is doing everything they can to ensure compliance. If they aren’t told about this soon, they may take on projects elsewhere, with clients or through agencies who have made clear their strategy for the reform.  If you are yet to inform contractors of your plans, you should do so right away.  Leaving contractors in the dark over IR35 could prove to be a big mistake, particularly in the current climate.  Equally, if your strategy is not to engage contractors who fall inside the regulations, you will need time to either develop direct-hire employment terms or to serve notice on their agreements.

I urge firms to ramp up their preparations for IR35 reform and keep contractors updated.  For more support or advice contact hello@HROptimisation.co.uk

*To get these results, Qdos surveyed over 1400 contractors impacted by IR35 reform

 

 

 

Hannah Powell