EMPLOYERS in Worcestershire are being advised that sweeping law changes are coming into place affecting the rules around using contractors.

The so-called IR35 changes, which come into effect in April, will see responsibility for determining whether a contractor is "inside" or "outside" the business resting on the employer.

The rules currently apply to public sector staff and were introduced by HMRC in 2000 to crack down on people avoiding national insurance or income tax by being employed through personal service companies.

IR35 rules are now being expanded to the private sector's medium and large businesses to make sure contractors pay the same tax as employees where required.

Sally Morris, partner and head of employment law at Worcester law firm mfg Solicitors, is warning the county's private sector businesses to be fully prepared.

She said: "I am concerned that many businesses here in Worcestershire are unaware of the seriousness and complexity of the new rules which will be ushered in from April.

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“In many ways the rules are an unfair burden on businesses who rely on using specialist contractors as from April a number of liabilities pass over to them.

"This includes them having to be responsible for issues such as National Insurance contributions and employment taxes.

“It’s a weight many don’t need but must understand if they are to stay on the right side of the rules when they engage contractors.

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

Ms Morris added that small businesses outside of the public sector should be exempt from the new rules but have to meet guidelines and conditions set out by HMRC to qualify.

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According to the government, the IR35 rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.

You may be affected by these rules if you are a worker who provides their services through their intermediary, a client who receives services from a worker through their intermediary or an agency providing workers’ services through their intermediary

If the rules apply, tax and National Insurance contributions must be deducted from fees and paid to HMRC.