Q. Whilst I’m aware that changes to the off-payroll tax were postponed recently as a result of the Coronavirus pandemic, I’m slightly confused as to whether the reforms are still pencilled in for April 2021. I’ve read that the Treasury is intent on making sure IR35 reform is introduced next year in the private sector, but has this been officially confirmed? Or is there a chance that it will be delayed further?
As things stand, IR35 reform in the private sector will be rolled out on 6th April 2021. On this date, medium and large businesses will become responsible for administering the tax status of contractors. As part of this reform, the risk will transfer from you, the contractor, to the party whose job it is to pay you (either your client directly or the recruitment agency that placed you).
In recent weeks, there has been some debate regarding whether the changes will be introduced next year, with David Davis MP tabling an amendment to the Finance Bill that called for a further two-year delay. However, this proposal was all but ignored by the Government, with MPs not even getting the chance to vote on it after Mr Davis’s amendment wasn’t selected by the House authorities.
This meant the proposed 2021 introduction was passed in the House of Commons without division. As a result, the Finance Bill is one step closer to being signed off and confirmed. While the Bill will be reviewed twice more in the coming months, there has been nothing to suggest that the Government will reconsider its position or that MPs overall do not support the changes.
So to recap, the Finance Bill is progressing as planned through Parliament, with the April 2021 reform included. As mentioned, the Bill will be considered again in due course, at which point MPs will have the opportunity to contest the changes.
Whilst a growing number of MPs from several parties have voiced their concerns regarding the legislation and the proposed changes, the Government seems hell-bent on ensuring that IR35 reform – which is short-sighted and needless – is enforced in the 2021/22 tax year.
With this in mind, contractors are advised to prepare for the changes. While it seems likely that you will lose the right to decide your own tax status next year, you are advised to ensure your IR35 compliance in the coming months. Additionally, if your client hasn’t discussed the changes with you yet, stress the importance of them prioritising well-informed IR35 assessments and avoiding blanket-decisions.
This answer was provided by IR35 specialist, Qdos Contractor.