Michael Meyer, from Cooper Lomaz Recruitment, explains a change on off-payroll working regulations
Over two-thirds of medium and large firms have reported that they’re not yet ready for the changes to the off-payroll working rules (IR35) that will substantially affect organisations.
These changes, which come into effect on 6th April 2021, will put the responsibility on deciding the employment status for tax on the business, a very relevant change for those who rely heavily on contractors.
Although the government granted a 12-month grace period for companies to prepare in March 2020, a majority still have a way to go – and at least a quarter weren’t even aware of the new laws, a recent survey found.
With most businesses still in an emergency mindset in light of the pandemic, preparing for the changes has taken a backseat for many.
Now is the time for business leaders who haven’t yet prepared to put this firmly near the top of their to-do list.
Those with existing contract resource need to identify which contractors they have, how they are being engaged with the business and then complete an individual assessment on whether the off-payroll working rules apply. This will need to be done on any future contract hires too.
Once an assessment is done, each contractor, or the recruitment agency if using one, needs to be notified of the result to ensure the correct tax and national insurance is paid by the individual.
In many cases where the rules are deemed to apply, it will have a big impact on the earnings of contractors, who will likely seek increased rates to compensate.
Businesses who fail to, or incorrectly determine the IR35 status of workers on these contracts could face steep fines.
Accurately completing an assessment and passing this on to the contractor or agency will ensure you can keep engaging with contractors without risk.
As Benjamin Franklin once said, by failing to prepare you are preparing to fail. Businesses who are not ready for the changes are likely to find themselves unable to engage with contractors, putting projects and the delivery of business services at severe risk.
For further advice on IR35, please do contact me on 01603 766760.
-- Michael Meyer is Commercial and Contracts Director at Cooper Lomaz