Construction HR specialist Randstad found 26% had no awareness of the rule changes or their potential business impact
Around 70% of medium and large construction businesses are still not fully prepared for upcoming changes to the IR35 legislation, according to a survey by recruitment agency Randstad.
The IR35 rules govern the tax status of an individual working as a contractor or freelancer and whether, for taxation purposes, they ought to be deemed an employee on payroll.
More than a quarter, 26%, of firms said they were totally unaware of the upcoming changes and their consequences.
Around 44% said they were aware, that they need to prepare for these changes imminently or are currently part way through this process, while only 30% reported having a plan already in place.
Owen Goodhead, managing director at Randstad Construction, Property and Engineering, said this was particularly worrying given the fact the sector has already been given a 12-month extension to prepare.
| Is your business prepared for upcoming changes to IR35 in April 2021? | (%) |
|---|---|
|
We aren’t aware of what the IR35 changes are or their impact |
26% |
|
We haven’t started our preparations for IR35 yet, but will be doing so |
18% |
|
We have started preparations for IR35 changes, but we aren’t there yet |
26% |
|
The business is prepared for the changes and has a plan in place |
30% |
Goodhead said: “Tax regime changes are likely to have fallen on the backburner given the upheaval generated by covid-19, with survival mode kicking in for many.
“But these changes will have a deep impact on recruitment and HR processes and operations, with the need for in-depth stakeholder training and deployment of new management tools.”
Originally set to come into effect from April 2020, the implementation of IR35 legislation changes was postponed until 6 April next year because of the coronavirus pandemic.
The changes mean that medium and large businesses in the UK will be responsible for determining whether IR35 rules apply to those working for them as contractors, whereas previously the individual contractor was responsible for making this decision.
The survey also revealed that 43% of construction employers do not know what the additional costs as a result of IR35 might amount to, while a fifth, or 19%, said they were likely to struggle to deal with the financial load.
| Do you feel that your business can cope with additional costs as a result of IR35? | (%) |
|---|---|
|
Unsure, as I don’t know what the additional costs might amount to |
43% |
|
No, I don’t foresee any additional costs |
13% |
|
No, in the current climate we will struggle |
19% |
|
Yes, we have assessed the costs and have sufficient resource |
25% |
Goodhead said it was imperative that firms were readying themselves now.
He said: “To put things into perspective, offers made to contractors now on the basis of a six-month contract will last beyond the 6 April 2021 and will therefore be in scope. This means the onus will be on the employer to determine the IR35 status of contractors and exercise reasonable care in doing so.
“Non-compliance with IR35 can bring with it potentially crippling financial penalties, which underscores the urgent need for employers in construction to understand and implement the government’s guidance.”
Hopes chancellor Rishi Sunak might delay introducing IR35 tax reforms next year were dashed last month after firms this week began receiving letters from HMRC telling them to get ready for the changes.
In September, HS2 minister Andrew Stephenson told an AGM for trade body Build UK that the government was keen to “reflect” on a host of tax changes due to come into force over the next two years including IR35, the reverse VAT charge and red diesel tax.
More than 200 firms were surveyed in the two weeks leading up to 13 November.
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