Scots firms unprepared for IR35 reforms ahead of April introduction - Hays study

One third of private sector organisations in Scotland that engage temporary workers are unaware of reforms to tax avoidance legislation, new research suggests.
Akash Marwaha is Hays managing director in Scotland. Picture: ContributedAkash Marwaha is Hays managing director in Scotland. Picture: Contributed
Akash Marwaha is Hays managing director in Scotland. Picture: Contributed

The IR35 reforms, which were enforced in the public sector in 2017, are aimed at tackling perceived tax avoidance by interposing a “personal service company” (PSC) to mask what tax authorities argue is in fact an employee and employer relationship.

The IR35 legislation will be enforced from this April for medium and large-sized organisations in the private sector.

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However, 33 per cent of private sector firms that engage non-permanent workers in Scotland are not aware of the reforms, according to research from Hays Salary Guide 2020. Almost half of organisations say the changes will make it much harder to hire temporary workers.

The reforms are most likely to affect the IT, construction and property, and financial services industries, Hays noted.

Akash Marwaha, Hays’ managing director in Scotland, said: “The timeframe between the review and the reforms coming into effect is very short, so it’s important for employers to act now to ensure they are aware of how these changes will affect their business.

“The first thing to determine is whether an assignment falls inside or outside of the IR35 rules. If the assignment falls inside of IR35, the person will be treated as an employee with PAYE and NIC deductions applied. It can be quite complicated to determine the tax status of each assignment.

“Our research in Scotland showed that 83 per cent of employers see the biggest risk of IR35 to be potential cost increases, However, the loss of key talent is also a big concern,” he added.

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