Upcoming IR35 Changes: What Recruitment, HR, and Hiring Managers Need to Know
Changes to company size thresholds from 6 April 2025 will shift IR35 status determination back to thousands of contractors. This will impact hiring strategies, compliance processes, and workforce planning.
Key Changes
New regulations (‘The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024’) will raise size thresholds for SMEs, reclassifying around 14,000 medium-sized businesses as small. As a result, these businesses will no longer be responsible for IR35 determinations—returning control to contractors.
Business Impact
Since 2021, medium and large private sector businesses have handled IR35 assessments, creating compliance challenges and discouraging contractor use. With the new thresholds, companies will have reduced risk and administrative burdens, making contractor engagement easier.
Seb Maley, CEO of Qdos, notes: “Businesses will welcome this shift, as IR35 rules have been difficult to implement. The change provides more flexibility and reduces risk.”
Implications for Recruitment, HR, and Hiring Managers
- Greater Access to Contractors: Easier engagement without IR35 liability concerns.
- Reduced Compliance Burden: Less administration for HR and finance teams.
- Hiring Policy Updates: Necessary adjustments to reflect the new regulations.
- Contractor Strategy Review: More businesses may now consider using contractors.
Industry Perspectives
While beneficial for businesses, some experts argue the impact is minor. Dave Chaplin, CEO of IR35 Shield, states: “The Treasury expects only a £20m annual cost reduction—just 1.1% of the £1.8bn collected under off-payroll working. The fundamental issues with IR35 remain.”
Key Actions for Hiring Teams
- Review Company Classification: Understand whether your organisation is affected.
- Update Hiring Policies: Adapt contractor engagement strategies.
- Communicate with Contractors: Clarify IR35 responsibilities.
- Monitor Future Changes: Stay informed on further IR35 reforms.
Looking Ahead
This update simplifies compliance for many businesses but does not eliminate IR35 complexities. Recruitment, HR, and hiring managers should proactively adjust strategies to optimise contractor engagement while ensuring compliance.
