COUNTY businesses using contractors have been warned to take notice of sweeping changes to the rules which have now come into force.

Employment lawyer Sally Morris, from mfg Solicitors, has warned county firms to be aware of the so-called IR35 changes, which came into effect in April.

Ms Morris said the rules mean employers have responsibility for determining whether a contractor is “inside” or “outside” the business, either in the public or private sector. These rules are designed by HMRC to crack down on people avoiding national insurance and income tax by supplying their services through personal service companies.

She said: “I am concerned that many businesses here in Worcestershire are unaware of the seriousness and complexity of the new rules which came into force on April 6.

"But they are here now and here to stay. In many ways the rules are an unfair burden on businesses who rely on using specialist contractors as from now a number of liabilities pass over to them.

"This includes them having to determine the status of the contractor for tax purposes and being responsible for issues such as National Insurance contributions and employment taxes if the contractor is a deemed employee.

"It’s an issue many don’t need but must understand if they are to stay on the right side of the new rules in relation to engagements with existing and new contractors.

"Those who don’t risk impact on their finances and their reputation."

Ms Morris added that small businesses in the private sector are currently not subject to the same obligations but still have to comply with certain guidelines and conditions set out by HMRC in relation to IR35.

The new tax cost could be as much as £1.3 billion in 2023/24.