A leading Worcestershire employment lawyer has warned businesses across the county that sweeping changes to rules on using contractors have now come into force.

The alert has been issued by Sally Morris, partner and head of employment at law firm mfg Solicitors, after the so-called IR35 changes came into effect on 6 April.

The new rules see employers of medium and large businesses having 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.

Ms Morris 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 6 April. 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.

Readers looking for advice can contact Ms Morris, who is offering a free 15-minute initial consultation on individual circumstances, through sally.morris@mfgsolicitors.com