Businesses using contractors in the UK have a ‘rapidly closing window’ to make appropriate preparations for IR35 reform, with only four months left until new legislation comes into effect, warns independent insurance broker Lockton.

Any company which uses contractors or has a flexible workforce will need to review its contracts, terms, and working practices, ideally before the end of December, to avoid extra costs.

Lockton head of recruitment insurance Stuart Armstrong said: “When IR35 was delayed by a year, HMRC warned that this period should be used wisely, but in reality, the window of time for companies to prepare is much shorter than that, given the complexity of the legislation and the risks it creates.  Industries that rely on a contractor workforce will be opening themselves up to a variety of business-critical risks if they don’t have preparations under way in the next few weeks.

“The full determination process will take months to organise.  If businesses do not act before April 2021, they face a tax bill, fines and penalties, damage to relationships, and loss of clients and contractors.

COVID-19 has had significant effects on companies as they have not wanted to hire permanent workers, thus, increasing the demand for temporary labour and contractors. This has drawn greater focus to the impending issue presented by IR35.”