74% of companies are unprepared for IR35

HR and payroll software provider MHR found that 74 percent of individuals responsible for IR35 preparations are unprepared for the anti-avoidance tax legislation.

IR35 is designed to stop companies from using ‘disguised employment’ as a way of getting around their tax and National Insurance obligations.

From April 6 2020, medium or large-sized businesses in the private and voluntary sector will be responsible for assessing whether contractors need to pay income tax and National Insurance contributions NICs. Previously, such checks have been carried out by contractors themselves.

MHR said these findings could mean businesses will be exposed to potential rising costs and a significant skills shortage in the future.

The reformed rules have been in place for public sector organisations contracting workers supplied through their own personal service companies since 2017. During this time, analysis of ONS data found the number of off-payroll workers in the public sector has dropped by nine percent.

The government’s Check Employment Status for Tax (CEST) service provides a simple step by step solution to help organisations quickly and accurately assess if IR35 working rules apply to individuals.

Where employees fall inside the rules, businesses will be responsible for deducting income tax and NICs via PAYE and will be required to pay employer NICs.