The extension of IR35 payroll legislation is forcing the private sector to reassess employee bases and business structures, and the big question is whether businesses are ready.

The short answer is no. There’s still a lot of work to undertake, and failure to fully prepare could result in significant labour supply issues, business continuity challenges and liabilities for tax, national insurance contributions, interest and penalties.

We’re finding many businesses still don’t know exactly how many off-payroll workers they have, and some haven’t yet taken steps to prepare. There’s also still a lack of confidence in determining employment status for contractors.

At a sector level there’s confusion in construction in particular, stemming from the interaction between IR35 and the Construction Industry Scheme for tax deduction (CIS). Many people have assumed CIS is a way to avoid IR35, but HMRC is clear: IR35 takes precedence over CIS.

If companies are robust in their preparations the move to IR35 presents a wealth of opportunity. It’s a time for businesses to re-evaluate their current workforce and project delivery operating models to ensure they really deliver the best possible value for money. Is it time to bring some roles on-payroll, or to engage a third party? With this assessment companies can determine the optimum model for future business growth.