Three-quarters of private sector businesses are not prepared for rapidly approaching IR35 reform which, from 6th April 2020, will see medium and large companies start administering the IR35 status of the contractors they engage.
With less than six months to go until this unpopular reform lands, 74% of more than 1200 individuals responsible for IR35 preparations at their company told payroll software provider, MHR, they are concerned they will not be able to manage changes. As MHR explained, this would leave these businesses exposed to rising costs, potential skills shortages not to mention risk their IR35 compliance.
According to MHR, the number of contractors operating outside the IR35 legislation since the introduction of similar changes in the public sector two years ago has dropped by 9% – a figure extracted from data from the Office for National Statistics (ONS). Focusing on this, Neil Tonks, IR35 expert at the company behind the research, highlighted how important it is that private sector firms give the changes the attention they deserve.
“IR35 represents a significant change in the way organisations in the private sector employ and pay their contractors. Preparing for the change is no easy task with the process estimated to take three to four weeks to complete, so it is critical that companies don’t pay lip service to the new rules and treat IR35 assessments as an urgent priority to ensure they fully comply.”
Sharing a similar view to Mr Tonks, was Seb Maley, CEO of IR35 specialist, Qdos, who also encouraged private sector companies to “equip themselves with the skills and expertise needed to make accurate IR35 assessments.”
In doing so, the Qdos CEO, said: “The private sector will be in a position to continue enjoying the flexibility and cost benefits experienced when engaging contractors compliantly outside the legislation.”
Further research conducted by recruitment agency, Robert Half UK, suggested that as many as three in five businesses are concerned they will not be able to engage contractors as a result of IR35 reform. Meanwhile, 42% fear they will lose their current contractors if they cannot renegotiate their contracts in time.
In response, IPSE’s Andy Chamberlain believes “this survey lifts the lid on just how worried UK businesses are about the IR35 changes.” Mr Chamberlain then went on to explain how “hirers have found it extremely difficult to balance IR35 compliance with retaining and attracting vital specialist resource.”
With a General Election looming, IPSE’s Deputy Director of Policy also urged the next Government to “hit the pause button on this legislation, which will be damaging not just to freelance contractors and the businesses they work with, but to the UK economy as a whole.”
After agreeing with IPSE that IR35 reform is unnecessary, Qdos CEO, Mr Maley, stressed how important it is that all parties impacted by the reform assume it will be enforced until told otherwise.
“Despite the upcoming General Election, contractors, their clients and recruiters must work off the basis that IR35 reform will be enforced – even if a new Government is formed. It was, after all, Labour that introduced the legislation.”
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