Eighty percent of UK businesses that use contractors and freelancers plan to review their IR35 workings. 

Research by Brookson Legal has found that companies want to get ahead of HMRC’s  transitions to enforce the ‘off payroll working rules’ introduced in April 2021.

When asked in the last quarter of 2021, 25 percent of medium to large businesses now responsible for the IR35 compliance of their contractors had already reviewed their solution.

 31 percent planned to do so before January 2022, while 27 percent planned a review before April 2022. HMRC are transitioning from “education” to enforcement of the new legislation.

Matt Fryer, Head of Legal Services at Brookson Legal, said: “For all organisations – whether they believe they are compliant or not – this is an essential opportunity to review their IR35 solution and ensure it not only meets HMRC’s threshold for reasonable care but, crucially, that it meets the needs of the business and supports its growth. 

17 percent of businesses will not be reviewing their solution before April, 4 percent of which do not have an IR35 solution in place. While 71 percent determined IR35 tax status of contractors via individual assessment on a contractor-by-contractor basis, 41 percent are also using role-based assessments and 25 percent have applied a blanket decision across their whole workforce or subsets of the workforce.

 The end of HMRC’s soft-landing coincides with plans by 90 percent of companies to extend their use of contractors over the next 12 months to support business growth.

This is particularly important as 29 percent of businesses surveyed said their approach to IR35 was an interim solution which would be replaced in the near future. Comparatively, 25 percent said their solution has been designed to evolve in line with their business, while 45 percent said they view their approach as a fixed solution which will be retained.

 The data highlighting how often businesses plan to review the status determinations of their contractors is interesting. More than 35 percent plan to review every six months (30%) or year (8%), while 61 percent plan to review contractor status’ each month (22%) or every three months (39%).

Mr Fryer advised: “Users of HMRC’s Check Employment Status Test (CEST) should also use this milestone to consider their use of the tool as a recent review of the new legislation by the National Audit Office found that CEST requires further refinement and additional user guidance”