The Enquirer has been contacted by worried white collar workers as major contractors carry-out audits of their freelancers.
HMRC rules are changing next Aprl making contractors liable for determining the tax status of off-payroll professionals
One worker said: “I’m on a major civils site and the main contractor is telling professional freelancers that they will have to go PAYE.”
Current rules allow workers to be employed via a personal service company (PSC) which determines whether IR35 tax rules should apply.
That responsibility will shift from April to contractors who will determine employment status.
One major construction company said: “We want to get ahead of the curve with this so we are talking to all our freelancers now to see what their future tax status should be.
“We are one of the first having a proper look at this but it will effect all major contractors.”
Freelance workers fear they will lose out through higher tax payments while contractors will also face bigger bills from direct employment.
But taxation experts say contractors shouldn’t panic.
Ian Anfield, managing director of Hudson Contract said: “With nearly six months to go before the IR35 changes come into force, there is no need for employers to rush into a ‘one size fits all’ PAYE solution, there is plenty of time to carry out genuine status determinations and get this right.
“We are helping a number of firms go through the process to determine which limited company freelancers need to be ‘encouraged more strongly to take permanent positions’ and which can remain as they are if they wish.
“Negotiations can be tough with those perceived caught because they have enjoyed the flexibility and cost efficiency of self-employment for many years, becoming an employee will be a culture shock.
“So rather than jumping the gun, firms need to understand that the majority of technical level freelancers are not caught by the current IR35 rules and will not be in April 2020, the shift in where the status risk lies will not change how status is determined.
“Like any other business risk, IR35 can be managed or eliminated and needs to be balanced against other risks such as losing the services of some of the best people in the industry – who will fiercely defend their right to be self-employed.
“The worst of all worlds is that these people are pressured into umbrella schemes under which they carry all the costs and downsides of employment with none of the benefits – no doubt the most valuable freelancers will vote with their feet if this happens.”
An HMRC guide to the changes can be found here.