A review conducted by the Treasury into the controversial change to legislation regulating the use of contractors urged that there would be a “light touch” implementation period, but the changes would go ahead in an attempt to address a “fundamental unfairness” within the UK labour market.

Off-payroll working rules, known as IR35, have been created to handle so-called disguised employment, the term for people who provide freelance services through personal service companies, but who the tax authorities believe should be treated as employees.

From April 6th, medium-sized or large employers will be allowed to determine the status of contractors, rather than the individual contractors they hire.

Firms will still be entitled to enlist off-payroll freelancer but must satisfy themselves that their use does not amount to disguised employment, The Times reports.

Accounting for the changes, several large employers such as Barclays, Lloyds and HSBC have said that they will no longer utilise off-payroll contractors to avoid the tax implications of using such workers.

Many contractors and freelancers have said that actions such as this have made it harder to find work.

The government said that employers who incorrectly determined IR35 status would not face penalties in the first year of the new approach. The Treasury promised that intelligence arising from the changes would not be used to open tax investigations into contractors for previous years unless fraud was suspected.

Representatives of freelancers accused the government of conducting a “recklessly inadequate” review. The Association of Independent Professionals and the Self-Employed (IPSE) said: “Not only was it not independently chaired, it was rushed out in less than two months.”

Andy Chamberlain, its deputy director of policy, said: “These rules will be catastrophic for the contracting sector and will do serious damage to client businesses and the wider economy.”

Off-payroll employment has several tax advantages for the contractor and employer, including not paying national insurance contributions. The government has said that disguised employment could cost the public £1.3 billion a year by 2024.

The government has argued that disguised employment also perpetuates “an unfairness between two individuals working in the same way, but paying different levels of tax”.