Research shows that over half of firms may not be preparing for IR35 changes in April 2021. This comes after over half of contractors stated that their end client had not yet contacted them about the off-payroll working rules, despite change being only three months away.

New research by Qdos, specialist contractor tax, IR35 and insurance adviser, reveals that the majority of companies may not be preparing for IR35 changes, despite the new rules being implemented in less than three months.

The current rules state that IR35 does apply if a worker/contractor provides their services to a client through an intermediary. However, the worker would be classed as an employee if they were contracted directly.

If IR35 does apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC. The Government have stated that these rules are to ensure that workers pay broadly the same tax and National Insurance contributions as employees.

However, from this April, organisations will be expected to make the final say about whether IR35 rules apply once they receive an individual’s service. In addition, the liability will be transferred from the contractor to the fee-paying party in the supply chain, which is either the end client or the recruitment agency placing the worker.

Despite these new rules coming into place, over half of contractors (57 per cent) stated that they have not yet heard from their end client regarding this reform. In fact, less than a fifth (15 per cent) have received a a Status Determination Statement (SDS), outlining their perceived IR35 position.

Just over a quarter of contractors (28 per cent) have been informed of their end client’s strategy but are currently still waiting to receive an SDS.

When analysing the figures closely, of those who have had their contract assessed, over half (56 per cent) have been determined as outside IR35 whilst 44 per cent have been deemed inside the legislation.

Overwhelmingly, seven in 10 businesses (70 per cent) believe that IR35 and the incoming reform to these rules are the biggest barrier to engaging contractors.

Seb Maley, CEO of Qdos, commented on this data, saying:

IR35 reform is rapidly approaching and businesses – whether end clients or recruitment agencies – yet to inform contractors of their plans should do so right away. Leaving contractors in the dark over IR35 could prove to be a big mistake, particularly in the current climate.

Communication is key. Contractors want reassurance that their IR35 status will be assessed fairly by a client or that their agency is doing everything they can to ensure compliance. If they aren’t told about this soon, they may take on projects elsewhere, with clients or through agencies who have made clear their strategy for the reform.

Right now, the last thing any business wants is skills shortages, as they look to navigate another lockdown. With less than three months to go until the changes, I urge firms to ramp up their preparations for IR35 reform and keep contractors updated.

*To get these results, Qdos surveyed over 1400 contractors impacted by IR35 reform.