According to a recent study, many UK firms are not adequately prepared for the off-payroll tax rule changes for the private sector to start in April 2021.
The survey, which had 3,300 contractors as respondents, revealed that 52 per cent of in-work contractors still need their employers to assess them for IR35.
Three-quarters of those assessed by a client, using HM Revenue and Customs’ (HMRC) Check Employment Status for Tax (CEST), said they think the online tool is inaccurate.
Additionally, down to worries surrounding non-compliance, 23 per cent of respondents reported their client had imposed a blanket ban on limited company contractors, rather than checking their workers’ status.
As a result, only a third stated that they are confident their current clients will remain after the IR35 changes start.
Due to compliance-related concerns, 62 per cent of respondents received offers to trade through an Umbrella Contract. Only eight per cent revealed they were happy to apply for an ‘umbrella only’ contract, whereas 61 per cent said they would not.
In total, 74 per cent of contractors who participated in the survey revealed that they cannot distinguish between a compliant umbrella and a tax avoidance scheme.
As a result of these issues, an estimated 41 per cent of contractors might dispute an ‘Inside IR35’ contract, and 65 per cent will avoid these altogether. Alternatively, 72 per cent plan to increase their rate.
Since April 2020, firms have a legal obligation to provide all workers with a Key Information Document (KID), before any legal agreement or contract.
However, according to the survey, 86 per cent of contractors were not handed this document and nearly 70 per cent did not know what a KID is.