Approximately half of businesses in the UK are still unprepared for changes to off-payroll working in the private sector, which are due to come into effect in April 2020, according to new research from recruitment trade body, the Association of Professional Staffing Companies.

The new rules mean that changes to IR35 legislation, which were introduced in the public sector in April 2017, will be extended to medium and large private sector companies. From next year, businesses engaging independent workers will become responsible for setting the tax status of these individuals.

As part of this reform, the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which is typically the recruiter or the company that directly engages the individual.

A survey of APSCo’s membership revealed that, although 79% of the professional recruitment firms polled believe that most of the businesses they work with are aware of the incoming changes, 51% said the majority of their clients are actively preparing for the updated legislation.

The figure represents an improvement from July 2019, when 12% of respondents said clients were putting plans in place to respond to the new rules.

When asked if the organisations they recruit into are expecting to pay more for contractors after the changes are implemented, 38% said ‘yes’. In July 2019, this figure stood at 10%.

Furthermore 70% of recruitment firms surveyed said that they are not expecting the majority of their contractors to agree to working ‘inside’ IR35 once the changes come into effect, suggesting a disconnect between the contractor and employer communities.

Tania Bowers, General Counsel at APSCo, commented, “The countdown to the off-payroll working reform is now well and truly underway, but our latest data suggests that many employers are either unaware of the wider potential consequences of the changes, or simply burying their heads in the sand.”

“Irrespective of any review into the roll-out, which may be announced in the Queens Speech (due this Thursday), clients should not be complacent given scale of this challenge,” Bowers said.