HMRC Announces 12-Month Delay To IR35 Reform

 

Coronavirus puts the brakes on IR35 reform, which will now be enforced in 2021

The COVID-19 outbreak has led the Government to postpone the extension to the off-payroll working rules in the private sector for one year, with IR35 reform now set to land on 6th April 2021. The original changes, which pass the responsibility for determining a contractor’s status from the individual to the organisation engaging them, were introduced to the public sector in 2017. Private sector reform was due to land in just a few weeks.

However, as a result of the global COVID-19 outbreak, the Chief Secretary to the Treasury, Steve Barclay, made the surprise announcement that controversial changes will be delayed in the House of Commons yesterday:

“I can also this evening announce the Government is postponing the reforms to the off-payroll working rules, IR35, from April 2020 to 6th April, 2021. 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 remain committed to reintroducing this policy to ensure people working like employees but through their own limited company pay the same tax as those employed directly.”

This positive news follows calls earlier this week from members of the House of Lords, who recommended that the Government rethinks its plans to roll out reform in light of the economic uncertainty resulting from the Coronavirus. Lord Forsyth of Drumlean, who is chairing the IR35 inquiry, suggest to HMRC that pushing forward in the current landscape would be “peverse” and recommended a delay period of six or twelve months.

For contractors working in the private sector, this announcement means you will be able to continue deciding your IR35 status for another year and will carry the IR35 liability when doing so.

Given many contractors were expecting to be placed inside IR35, forced to work via an umbrella company or banned by their client altogether, the news has been recognised as a smart move and one that protects the best interests of the independent workforce at this troubling time.

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