Businesses unprepared for contractor tax changes

(3 minutes to read)

From next year, businesses engaging independent workers will become responsible for setting their tax status. As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual.

Latest research has shown that employers are largely unprepared for changes to off-payroll working in the private sector, which are due to come into effect in April 2020.

The survey, carried out by the Association of Professional Staffing Companies (APSCo) revealed that fewer than half (39%) of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes. In addition, just 12% said the majority of their clients are actively preparing for the updated legislation.

When asked if the organisations they recruit into are expecting to pay more for contractors after the changes are implemented, just 10% said ‘yes’, 21% said ‘no’ with the remaining 69% ‘not sure’. This suggests that many are unaware of the wider potential consequences of the reform.

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Samantha Hurley, Operations Director at APSCo and Co-Chair of HMRC’s IR35 Forum, commented, “Businesses now have just months to get ready for incoming changes to IR35 legislation but, as this research suggests, it seems that many may be ill-prepared.

“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.

“They should then work with trusted recruitment partners to discuss which roles are likely to be in scope across different levels, and if individuals with these skills are thin on the ground or easily replaced, so that plans can be put in place to enable them to sustain and grow future workforces effectively.

“If we’ve learnt anything from the public sector roll out, it is that we are now entering a period of significant and arduous change. However, by working with expert recruitment partners, private sector organisations can ensure that they navigate the new landscape with ease.”

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