More than four in 10 employers will review their contractor strategy ahead of the new off-payroll working rules, a major study has revealed.
The research, published by digital solutions provider Bedigital, shows that businesses remain sceptical of the rules, with some even cancelling projects because of the potential tax impact.
Under the new rules, which come into effect on 06 April 2020, medium and large-sized employers will be held responsible for determining a contractor’s employment status.
The reforms come after reports of workers using intermediaries – such as personal service companies (PSCs) – to pay less tax, even though they are working as if they were employed, known as a “disguised employment” scheme.
Because the new rules place the burden of responsibility of determining employment on employers, as well as the liability for underpaid tax, businesses are unsure how to proceed with contractors.
According to the study, 41 per cent of participants will “review their strategy around engaging off-payroll workers come April 2020”, while 11 per cent will actively decrease contractor numbers – even if it means cancelling critical projects.
Around 45 per cent of businesses, meanwhile, admit to “being confused about what action to take next”.
Commenting on the report, Richard Tyler, a spokesperson for Bedigital, said: “The results of this research clearly highlight the need for businesses to gain a much broader understanding of what the upcoming IR35 means, and how it will affect their company finances.
“Whilst the new off-payroll rules present a level of risk to businesses in the short-term, acquiring services using outcome-based SoW’s is a sensible way of reducing risk. However, if businesses do not adequately prepare for the changes, it may quickly create unexpected costs and issues”.
For help and advice preparing for the new off-payroll working rules, please get in touch with our expert team.