The Government has delayed controversial IR35 reform by one year because of the COVID-19 pandemic. This means that contractors will continue to decide their IR35 status for another 12 months when working in the private sector.
After it had been confirmed in the Budget only last week that changes to the off-payroll working rules would be introduced on 6th April 2020 as planned, contractors had all but given up hope of a last-minute rethink. However, as a result of the Coronavirus outbreak and as one of the Chancellor’s many measures to protect businesses, the Chief Secretary to the Treasury, Steve Barclay announced the sensational delay in the House of Commons last night.
While contractors will no doubt welcome this news, Barclay insisted that the Government has every intention of rolling further IR35 changes out next year, stating: “This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals. This is a deferral, 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.”
Even so, IR35 specialist, Qdos, praised the Government for seeing “sense” and making what CEO, Seb Maley, said is “the right call in these unique circumstances.” Maley also explained that given “the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.”
Andy Chamberlain, Director of Policy at IPSE agreed: “The Government has done the sensible thing by delaying the changes to IR35 in the private sector. These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.”
Continuing, Chamberlain said it “is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.”
He is also of the view that the Chancellor should go one step further during the Coronavirus outbreak and “create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.”
Given the Government’s insistence that the changes will be introduced in 2021, Qdos CEO, Maley, was quick to point out that this is “only a delay, albeit a very welcome one.” As a result, he called on private sector firms to continue their preparations: “It does, however, give private sector firms vital time to prepare for reform which can only be a good thing for contractors. What matters now is that businesses use this time wisely.”
In the coming days, the Government is expected to publish further information regarding IR35 reform and announce new measures to support businesses in this crisis.