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91% say clients have no awareness of 2020 IR35 changes, REC reveals

New rules on how contractors working in the private sector pay tax (IR35) will come into force in April 2020, one year from now. The Recruitment & Employment Confederation (REC) is urging the government to commit to publishing the final legislation by October 2019, giving businesses six months to prepare fully for the new rules.

Candidate shortages for permanent roles mean that the use of contractors provides UK employers with a crucial outlet and a means of harnessing the right skills and expertise quickly. In times of uncertainty, access to highly skilled individuals to drive specific projects has become more important than ever. As they stand, IR35 rules put some people off contracting.

The REC believes agencies (recruiters) should not bear responsibility for their client’s (the organisation/recipient of the work) decision on who falls into IR35 status, and wants HMRC to support recruiters in determining who is eligible to pay IR35 tax.

A new survey of REC members readiness for IR35 changes indicates:

  • Nine in ten respondents (91%) said their clients have only some or no awareness of the changes coming into effect.

  • More than nine in ten respondents believe that making clients liable for their worker supply chains would improve, at least to some extent, accuracy on IR35 determination.

  • Almost a third (30%) have no confidence in the ability of the government’s CEST tool which is used to make accurate IR35 determinations.

  • Seven in ten (69%) respondents said that the requirement of all parties to pass along IR35 determinations is a concern.

Recruitment & Employment confederation director of policy and campaigns, Tom Hadley, said, “Contractors and interim managers play an essential role within our economy – especially in periods of transition and uncertainty. The planned changes to taxation which are due to come into effect a year from now could significantly impede labour market agility at a time when UK businesses need it most.

“I am pleased that the Chancellor responded promptly to a recent letter from the REC detailing our concerns about where liability lies within the recruitment supply chain when determining IR35 status, and about how the small company exemption would work in practice. We also urge HMRC to improve the CEST tool for checking status to give employers and recruiters a fair chance of implementing the charges effectively, with a recent survey of members saying that a third had no confidence in the tool.

“Everyone should pay the right level of tax but what our members want is clarity and a level playing field. We will continue to work with the government to find solutions and ensure that we do not jeopardise the substantial benefits that contracting brings to the UK economy.”

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