IR35 Off-Payroll Reform Delayed Until 6th April 2021

18 March 2020

As one of the most controversial pieces of legislation affecting the flexible workforce, IR35 is never far from the headlines and there have been campaigns and protests to try and halt the reforms. That has now been successful as Contractors celebrated their success last night.

It has taken a pandemic, but HMRC and the Treasury have finally folded to pressure from Contractors and businesses alike to allow a 12-month reprieve from the changes to the IR35 private sector reforms.

Steve Barclay, Chief Secretary to the Treasury, confirmed that the reforms due to come into effect from 6th April 2020, which would make end-users responsible for determining the tax status of contractors, have been delayed for 12 months.

Steve Barclay MP said: “The government is postponing the reforms to the off payroll working rules, IR35, from April 2020 to April 6, 2021. This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals.”

He added: “This is not a cancellation and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly.”

Many believe the delay was in large part due to the House of Lords Finance Bill sub-committee and the masses of evidence presented before them about the failings in the rules, issues with CEST and a lack of employment rights despite employment taxes for contractors. They sent a very clear message back to Ministers via the witnesses for HM Treasury.

Though the Government has stated its intentions to legislate next year, contractors, clients and industry stakeholders will no doubt welcome the additional time granted to ensure they are ready, and, hopefully, with better legislation and more fit for purpose guidance and CEST tool at the helm.

That being said, whilst the delay has been welcomed by many amid a difficult economic climate, businesses shouldn’t just shelve the work they have already done until March next year, and once we move through the COVID-19 crisis, be ready to pick the project back up to ensure they are ready for 6 April 2021. It is likely new assessments will be needed to ensure “reasonable care” and negotiations to rates up and down the supply chain should take place sooner to allow for more breathing space.

In addition, we recommend that all end-users get in touch with their Contractor workforce to remind them that IR35 as it stands still applies, i.e. it is the Contractor’s responsibility to determine their status and calculate a deemed employment income payment if necessary. This will go someway to alleviating any Corporate Criminal Offence risk for the end-user.

If a Contractor has already received an “inside” Status Determination statement then they should be particularly wary about what action to take at year end and seek professional advice. HMRC’s commitment to a “light-touch” approach and no automatic enquiries was only in relation to the new rules and Contractors should ensure they have their evidence ready in the event of any HMRC challenge.

If you would like to discuss the IR35 reforms or how this delay will affect you or your business and what action should be taken, please get in touch with Charlotte Edwards (charlotte.edwards@aab.uk) or your usual AAB contact.

 

If you are unsure about what Government support package is available to your business, we are here to help. We have created a simple toolkit that cuts through the noise and makes you aware of exactly what help is available to you. It takes a few minutes to fill out and you can find it on our COVID-19 Information hub

By Charlotte Edwards, Employment Taxes Senior Manager & Head of IR35

For more information on Charlotte and the Employment Taxes team, click here.

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