HM Insights

Coronavirus COVID-19 - Postponement of IR35 reforms announced

It has been announced that changes to the off-payroll working rules, which were due to come into effect on 6 April this year, have been postponed and will instead come into effect on 6 April 2021.

Chief Treasury Secretary, Steve Barclay, confirmed on Tuesday that the move was part of a broad package of measures to be introduced in a bid to protect the economy during the Coronavirus outbreak.

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What is IR35?

IR35 is a term used to describe a series of reforms to taxation legislation which was first introduced in the year 2000.  It is designed to ensure that those individuals providing services to an organisation via an intermediary company, such as a personal service company (PSC), pay the same tax and national insurance contributions as employees if the working and contractual arrangements between the parties suggest that the individual is in fact an employee who is working under the direction and control of the engaging organisation.

At present, contractors engaged by a private sector company are responsible for assessing their own status for tax purposes and paying their own tax.  The reforms intend to change this position to mirror that of the public sector, by shifting this responsibility to determine the tax status on to the engaging company.

The reforms do not apply to small private sector organisations, and as such contractors providing services to small companies will continue to be responsible for determining their own tax status.

"Deferral, not cancellation"

Given the level of uncertainty during this unprecedented time, and the difficult economic challenges which now seem inevitable, the Government's announcement on this postponement is likely to be welcomed by both those providing services through an intermediary and those organisations engaging them.  In addressing the House of Commons during the Budget debate yesterday, however, Mr Barclay was keen to stress that this was a deferral and not a cancellation, confirming that the Government remains committed to introducing these reforms next year.

We have been advising our clients for some months now to prepare for these changes well in advance of April, however any significant changes can now be put on hold to allow organisations to focus on more pressing matters.  If you require any further information, or assistance with how to manage the engagement of self-employed contractors in the interim period, please do not hesitate to get in touch.

Get in touch

If you've any queries about this, or any other employment related matter that could affect your business, our team of specialist employment lawyers can assist. Please contact us to discuss further.

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