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COVID-19 leads to last-minute IR35 reform delay

IR35 experts praise Chancellor for making the ‘right call’

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.

IR35 reform deferred, not cancelled

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.”

Government sees “sense”

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.”

Firms must use time wisely

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. 

By Contractor Weekly

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25 thoughts on “COVID-19 leads to last-minute IR35 reform delay”

  1. Brian Edwards

    Too late….The ship has sailed and killed the independent contract sector in this space

  2. kevin jones

    is the offshore industry going to honor the government proposal to suspend the IR35 until April 2021 .
    and let us continue our self-employed status

  3. JoJo San

    There must be a rather influential loby behind this because the government is clearly clinging to it with some ferocity
    Guessing the bean-counters and /or the humphries
    And, even though it’s an extremely dumb idea

  4. Oliver Hubbard

    Unlikely to make much of a difference.. So many companies have already stated that the only way to work for them is via Umbrella. I can’t see any of them going back on this if this is only a delay.

  5. DaveJFT

    This mustn’t be the end though by any means. We need to keep up massive pressure on government and the House of Lords for a full, proper and impartial review of ALL aspects of IR35 reform, including workers’ costs, risks and rights – not just HMRC’s blinkered approach of “same job, same tax”. Maybe the assessments should not be done by the worker or the client but by purely independent analysts and be binding on the client to honour. Right now the clients get to have their cake and eat it by making deliberately skewed determinations that suit their viewpoint yet have no consequences brought upon them of skewing the determinations.

  6. Good Name

    @Jojo San, yes there is a lobby behind it. The strongest lobby you can ever imagine. The one and only lobby that pulls the strings of the puppets in government, politics, civil service, judiciary, media and finance – all from behind the scenes.

    • JoJo San

      Would you be inferring those that control the money supply?

      • The Original Good Name

        Indeed Jojo San. The same group. The group that devour our taxes, the group that every nation pays interest to by printing money, the group that causes conditions that lead to printing money, the group that will never be satisfied until it has enslaved every last one of us.

  7. My Good Name

    Operation successful, patient dead

  8. Chris

    The only time I’ve found it easier to engage with agents / end clients on the matter of IR35 was when hmrc announced it was going to extend ir35 off payroll legislation to the private sector. Sure blanket determinations were made most likely because it reflected that the company really never actually thought of their contractors as being independent and never cared what the contractor determined ir35 status was to begin with (and why should they when a lot of contractors didn’t care themselves) , but for many companies it forced them to be up front and decide to put in the effort to go through the process and agree to treat contractors as independent. Before this it was hit and miss and 50% of the time a true hasstle to get clients to understand the rules – and many didn’t or even said it was of no consequence to them either way.

    I don’t agree with the method of implementation but I agree with the concept of IR35. Only wish they’d scrap the current legislation and just have a sliding scale of corporation tax for director only companies, in a similar way to how they’ve implemented VAT. Would simplify things no end, but I guess too many public servants would lose their jobs if hmrc did the decent thing and uncomplicated its processes. More complexity = less visibility and accountability = higher budgets for the departments in question. Or am I just being cynical?

    • Iftikhar

      Chris I agree with your balanced view. Maybe there should be a ‘contractor’ tax code where we contractors at times work as a cross between permanent and freelance.

    • Taffy

      Please reconsider your IR35 stance
      Income tax is spiteful, irrational, grounded in envy and totally unnecessary
      There are much more fair ways of raising revenue

      • Chris

        Quite happy with my stance on ir35 (if you mean me) as I dislike permie type roles masquerading as contracts and the contractors happy to work in them. I’d question why you believe taxation based on % income is unfair. Certainly can’t see how it’s based in envy.

    • CX

      That really isn’t a good idea. Having a set of statuses where there are tax advantages of one over others means that there will be a stampede towards the most advantageous status.

      These are all completely artificial – the ways to differentiate are so nebulous and ill-defined that inventing another status – or set of statuses – will only lead to more confusion and court cases.

      Get rid of employers NI and most of this problem disappears, then we’re only arguing over expenses.

      • Chris

        Current PAYE banding doesn’t cause issues, neither (to my knowledge) does the current VAT banding, although admittedly VAT in its current incarnation is inherently unfair on lower wage earners and probably needs to be revisited.

        Don’t think it necessarily follows that banding corporation tax will result in court cases or more confusion (although you’re entitled to your opinion, but reasons why you think this would be good to see), and those who try to abuse the system and fudge their way to the lowest banding are probably those who confuse tax avoidance with tax planning – for those people being inherently dishonest will probably exist whatever HMRC does or doesn’t do because their always looking to let somebody else shoulder the financial tax burden. Like many, I’m happy to pay what’s due based on clearly defined rules, which you could have in banding, but the issue here is that HMRC doesn’t want clear rules, or seem capable of implementing them, as confusion keeps the many people involved in ir35 in a job.

        Personally the whole tax system in the UK is more complicated than it needs to be, but equally if you’ve ever looked at what other European countries have implemented you’d probably think that what we have in the UK is simple by comparison.

  9. Good name

    Whilst I welcome this news, the government needs to make fundamental changes to this legislation. A good start would be to have a proper definition of self employed, instead of just saying you do similar work so you are going to be taxed as an employee. How ridiculous, I though people in government were meant to be intelligent. By that standard, the self employed window cleaner is the same as a cleaner working for a company for tax reasons but without any guarantee fee of work. This also make a window cleaner more self employed than a professional engineer providing consultancy services to a client,who conveniently for tax purposes is employed. The government need to scrap the whole thing a start again. With a proper definition they can then tax appropriately. Lets also remember its the employers NI the government are missing as contractors pay their fair share in corporation tax and self assessment tax already.
    Contractors were going to be lumped with employers NI and the apprenticeships levy. It’s a complete scandal.

    • Widgy

      Good name : Very considered approach
      Sadly, UK does not do common sense anymore

    • CX

      You’re one of the few who see that employers NI is the real problem. The solution is to get rid of employers NI.

      Not only does it deter businesses from setting up here, it disadvantages British-based workers over people working elsewhere.

      It will need to be done gradually, I suggest the current £2k threshold is gradually increased.

  10. paul jacob

    This is ridiculous its like commuting the death penalty for someone on death row for a year. Absolutely thank you FOR NOTHING. Many firms now only employ inside IR35, they wont change back for 12 months. We dont do th esame work as an empoyee, an employee doesnt look for new work every 6 months, doesnt have a 3-6 month contract, an employee gets paid good times and bad, a contractor doesn tget paid between contracts. Many contractors live outside reasonable commuting so have accomodation. It is absolutely not true that a contractor should pay the same tax even i they are doing a similar job ..e.g. doing interim maternity cover most do project or transformation work. Lets face it no one would do this flexible work if it didnt have an upside. Oh and I get 1 weeks notice and zero redundancy pay. My day rate makes up for the holidays , training and sick pay that I do NOT get. All that will happen is that the banks will put work packages overseas and the chancellor HMRC will get jack ! That’s the reality of this mindless and churlish legislation.

  11. Simon

    Delaying the inevitable is more to protect those tasked with implementing IR35 in the private sector rather than for consideration of those personally impacted.

    Maybe HMG should also use this time to consider how contractors will also enjoy the same benefits as those employed directly that pay equivalent tax.

    No doubt a lot of dedicated, specialist contractors will help both the public and private sector during this difficult time whilst in some instances paying equivalent tax and enjoy none of the SSP benefits or privileges of (dare I say) their less productive, efficient and effective permanent colleagues.

  12. IR35 Victim

    HMRC are forecasting the cost to the engagers all 60,000 affected to be £20m over 5 years.

    That means it will only cost companies that use contractors £125 per year to implement IR35.

    In my previous company they had a dedicated member of staff, that’s more like £20k per year not including the meetings with HMRC to avoid prosecution.

    This has killed the freelance market.

  13. No Rights Worker

    This is just taxation without obligation.

    If we are to be taxed as employees, then we should have the same rights as employees.

    Freelancers exchange rights for higher rates and they take the chance on work no being consecutive.

    IR35 can only destroy the market it does not support or enhance it just destroys flexibility.

    If I pay ALL the tax HMRC has decided I should, WHY IN EARTH WOULD I NOT BE AN EMPLOYEE.

    Flexible market dead, HMRC has achieved the biggest home goal ever.

  14. GigEconomyWorker

    What about big companies that are forcing contractors to work thru umbrella companies? They should face the consequences now. They see contractors as flexible workers to benefit them and yet they ask to comply myriads of terms and conditions while setting their status to inside IR35. Who are they to decide contractor is inside IR35??? Nobody is begging them to give a job, They are seeking contractors because their lazy permanent staff haven’t upgraded themselves.

  15. CX

    This is worse than before. I’ve not worked for over a year due to these stupid changes and now it will go on for another year of the same.

    We need a new political party. The Conservatives are only in power because they were the least worst on delivering on a democratic vote. Once that’s over we’ll see all the spin and lies (remember when they promised to repeal IR35 under Hague/IDS?).

    New line of business coming for me I think. The contract market is dead to me – what a waste to this country of a darned good skill set, even if I do say so myself.

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