With just under three weeks to go until the IR35 deadline on 6 April, new research from leading business and financial adviser Grant Thornton UK LLP finds that over one in three (38%) mid-sized businesses are not ready for the transition.

Grant Thornton surveyed 605 UK mid-sized businesses on how prepared they were ahead of the deadline and found that over one in ten of those surveyed (13%) had done only minimal preparation or were in the early stages of their planning.

A further 25% had their preparations underway but were still not ready for the deadline.

From 6 April 2021 onwards, for large and medium sized businesses, the responsibility for determining whether a contractor is deemed an employee for tax purposes shifts to the end-user of their services. This means that organisations could now be liable for PAYE and National Insurance Contributions on their population of contractors within scope of the updated off-payroll working rules (IR35).

Only just over half of the businesses surveyed (59%) believed they were ready for the upcoming changes.

Bethan Gill, Associate Director, People Advisory, Grant Thornton UK LLP, commented: “The new IR35 rules can be difficult to navigate and are likely to result in significant additional compliance burdens and employment tax considerations for many organisations. While the deadline is getting ever closer, there is still time. Businesses should be taking action now to ensure that they have considered their position and properly assessed the impact of the new rules and how it can be effectively and compliantly managed.

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“While the theory behind the legislation is relatively straightforward, there are many practical considerations when applying the new rules. These include how to identify contractors, the best approach to assessing their employment status, communication with relevant parties, potentially operating payroll withholding and managing potential disputes.

“Although it presents an immediate compliance burden for many, the preparation for IR35 also offers an opportunity for organisations to review their wider resourcing strategy to find the most effective and efficient way to create value from their people. Our research found that the preparation process for IR35 had provided many businesses with the opportunity to reassess their wider people strategy.”

The research follows the launch of Grant Thornton’s Employment Status Intelligence Platform (ESIP) which can support organisations across sectors in navigating the changes, by providing teams with the data and insight needed to comply with IR35.