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The introduction of IR35 reforms to the private sector this year has posed significant challenges for organisations that want to use contractors for short-term project work. Similar rules in Europe have also been less than effective. Roderick van Vliet looks at what is expected to follow.
With pandemic restrictions gradually being lifted, many companies and contractors have been looking forward to getting back to business as usual. However, the new IR35 requirements that have recently come into force could create major headaches for organisations and impact the employment status of thousands of workers just as they are about to return to the office.
IR35 is a UK tax legislation designed to prevent “disguised” employment, where businesses engage workers on a self-employment basis, generally in order to pay less tax or even circumvent employee protection. The changes to IR35, which were meant to come into force in April 2020 but were delayed by 12 months, mean that it is now the responsibility of private companies to identify the IR35 status of their contractors – and whether or not they should be paying the same tax and national insurance contributions (NIC).
The intentions behind IR35 are positive: the government aims to address a perceived unfairness in the labour market, protect workers and increase its tax revenues. In practice, however, businesses will need to spend more time and money on formalising work relationships with contractors. Previously, using contractors was an easy way to hire a talented worker for a specific project, but now employers