IR35 reform in the private sector will certainly be enforced on 6th April 2021, after MPs voted against delaying the controversial changes until the 2023/24 tax year in Parliament on 1st July.
At the Report Stage of the Finance Bill, an amendment tabled by David Davis MP that proposed postponing the reform for two years gained significant support but wasn’t passed. The 254 MPs who voted in favour of ‘Amendment 20’ were overruled by the 317 who rejected it.
As a result, the 2021 rollout has been accepted as part of the Finance Bill, which will soon be read for a third and final time before travelling through the House of Lords. It will then progress to Royal Assent where it will be agreed as law.
While there are clearly many MPs other than David Davis concerned about the changes, including acting Liberal Democrat leader, Sir Ed Davey and the SNP’s outspoken Alison Thewliss, it is thought that Government whips exercised their influence in this debate. This didn’t go unnoticed, with Ed Davey slamming the “many Tory MPs” for “ignoring their constituents and doing what they were told to by Government whips.”
This latest development is significant because it means “IR35 reform in the private sector has effectively now been signed off and will arrive in April 2021”, explained Qdos CEO, Seb Maley, who went on to say: “Despite concerns raised by a number of MPs, who rightly exposed the flaws of this legislation and made it clear they do not believe changes are necessary, it seems there’s no turning back now.”
Maley was also critical of the Government for going ahead with “short-sighted” reform which, “if mismanaged poses a risk not just to contractors but to hiring organisations and recruiters.”
With reform now confirmed as part of the Finance Bill, Qdos is one of a number of IR35 specialists that immediately called on private sector businesses to step up their preparations. CEO, Seb Maley, said the ball is in their court: “It’s up to private sector firms to prepare for the changes, which can be managed with the right approach. However, work must start immediately – I can’t stress enough how important this is. For companies to compliantly engage genuine contractors beyond April 2021, they must avoid risk-averse policy decisions and instead prioritise fair and considered IR35 status assessments.”
Despite the apparent certainty regarding the introduction of IR35 changes next year, IR35-lobbying body, IPSE released a statement in which it said it will continue to “press the case” to the Government regardless:
“The UK is now facing one of the most severe economic crises on record. We will press the case that now is the worst time to push the damaging changes to IR35 onto an already under-supported and struggling freelance sector. The passage of this Finance Bill and its changes to IR35 legislation is disappointing and a setback. However, it is part of a much larger discussion about creating a modern tax system that works for self-employed people. Rest assured that we are already pressing ahead in this wider discussion, working hard to get a fair deal for freelancers.”