With little more than four months to go until IR35 changes come into effect this April, according to recruitment agencies, nearly half of private sector companies aren’t yet preparing for the introduction of the off-payroll working reforms*.
From 6th April 2020*, much like in the public sector, medium and large private sector companies will be handed the responsibility of deciding if a contractor belongs inside or outside IR35. As part of this unpopular reform, whichever party handles the payment to the contractor will be transferred the tax liability.
Only half of businesses “actively preparing”
The research, produced by the Association of Professional Staffing Companies (APSCo), shows that recruiters lack confidence that their private sector clients will be ready for changes to the IR35 legislation. Only 51% believe these companies are ‘actively preparing’ for the imminent rule changes, despite nearly eight in ten (79%) being ‘aware’ of the incoming reform.
Firms mustn’t bury “heads in the sand”
In fairness, these findings do at least represent a big improvement since July 2019, when only 12% of agencies said hiring organisations were getting ready for the introduction of IR35 reform. However, the perceived lack of preparation in the marketplace is still a cause for concern, explained APSCo’s General Counsel, Tania Bowers.
“The countdown to the off-payroll working reform is now well and truly underway - but our latest data suggests that many employers are either unaware of the wider potential consequences of the changes, or simply burying their heads in the sand.”
Prepare “irrespective of any review”
APSCo has suggested that hesitation among private sector firms could stem from the re-elected Government’s vow to review IR35 reform. You might be aware that in the weeks leading up to the general election the Chancellor pledged to conduct a review of the incoming changes. While a review has been welcomed by experts, APSCo’s Tania Bowers urged hiring companies to look past it and prepare regardless.
“Irrespective of any review into the roll-out, which may be announced in the Queen’s Speech, clients should not be complacent given the scale of this challenge. Businesses now have a few short months to get ready for incoming changes to IR35 legislation but it seems that many may be ill-prepared.”
She then explained: “Companies which haven’t already must urgently review their existing contingent workforces to determine what employment models individuals are working through to understand the extent of PSC contractor usage.”
Work with partners and learn from public sector
Given the uncertainty that continues to impact the sector as a result of these tax reforms, the association’s Tania Bowers also encouraged private sector companies to work with trusted partners “so plans can be put in place to enable them to sustain and grow future workforces effectively.”
As April approaches, Bowers also called on the private sector to learn from the mistakes that have been made in the public sector, which led to a number of blanket determinations and contractors being incorrectly placed inside IR35.
“If we’ve learnt anything from the public sector roll-out, it is that we are now entering a period of significant change. However, by working with expert recruitment partners, businesses can ensure that they can navigate the new landscape easily.”
Get help from Parasol
If you're looking for a trusted partner to work with to help you navigate IR35 reforms, please visit our IR35 resource page or get in touch with our agency support team.
*Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.