IR35 warning: Fears mount as businesses are not prepared for HMRC changes

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IR35 changes will come into force this month, after a delay was put in place last year as a result of the pandemic. The off-payroll working rule changes, HMRC has said, are designed to ensure fairness, but some have raised concerns about how these will be implemented. With private sector organisations now having the ability to make up their own mind’s about a contractor’s IR35 status, many will have to take on new and extensive responsibilities. 

But preparation for this will be central to ensuring the rules are complied with and that the process goes smoothly. 

New research from Brookson Legal has found only five percent of current adverts for contractor roles mention IR35.

This is despite previous research showing the majority of contractors are more likely to work with a company which advertises roles outside of IR35.

Many businesses have proven themselves unprepared ahead of the all-important deadline, the organisation has stated.

However, highlighting IR35 status, one expert has said, could be the key to recruiting flexible talent going forward. 

Matt Fryer, Head of Legal Services at Brookson Legal, commented on the matter.

He said: “Although it’s understandable the number of businesses currently indicating IR35 status on job ads is low, it is a growing trend and we expect this to increase significantly as we pass the IR35 April 6 deadline.

“Under the new rules, businesses have a responsibility to inform contractors of their tax status for each project. 

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“Ensuring clarity on IR35 in adverts for new roles demonstrates that your business has understood and is actively complying with the legislation. 

“Advertising roles outside IR35 makes them an attractive prospect for high skilled contractor talent. 

“With the prospect of economic recovery in sight, businesses need to act quickly now to ensure IR35 compliance if they wish to secure the best people to deliver new projects and scale up operations.

Businesses now have just days left to come to terms with the IR35 changes, which can often be complex to understand.

But with more responsibility placed on organisations it is clear getting to grips with the legislation is key to success.

As Mr Fryer went on to highlight, businesses should be actively preparing themselves for not only the changes, but their implications in the long-term.

He said: “April 6 is not the end of the IR35 journey, it’s the beginning.

“With businesses rushing to get IR35 done ahead of the deadline, now is the time to re-evaluate the solutions in place to ensure they are fit for business as usual.

“As IR35 becomes the norm, businesses need to take a completely new approach to contingent workforce management.

“Processes need to be embedded throughout the company to ensure continuity, including undertaking a fair and accurate employment status test, managing the process of any challenges to status determinations, contract migration and recruitment.

“It is also vital to maintain visibility of the temporary workforce and control of risk throughout the supply chain.”

As the economy begins to start its recovery process, Mr Fryer warned that a failure to have an appropriate IR35 solution in place could be catastrophic.

However he did go on to state it was not “too late” to businesses to act in implementing an effective IR35 solution.

Mr Fryer advised seeking support as soon as possible to avoid potential complications later down the line such as fines from HMRC or shock tax bills. 

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