In an unexpected turn of events, the Government has announced that IR35 reforms in the private sector will be deferred for 12 months.
The new rules would see every medium and large private sector business in the UK become responsible for setting the tax status of any contract worker they use from April 2020.
Despite last week’s Budget confirming that the IR35 reforms would be implemented from 6 April 2020, the ongoing Coronavirus crisis has led to a last minute deferral of the new regulations until April 2021.
Earlier this week, members of the House of Lords said the rules should be postponed in light of the coronavirus fallout and its economic impact.
“This is a deferral in response to the ongoing spread of Covid-19, to help businesses and individuals,” announced Chief Secretary to the Treasury, Steve Barclay MP to the House of Commons.
“This is a deferral and 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 amount of tax as those employed directly.”
Too little, too late
Though welcomed by businesses and professional advisers, such as ourselves, who support contractors, the announcement comes too little, too late for many.
There are larger organisations that have cut ties with all limited company contractors, often wrongly deeming them inside the rules to avoid being penalised for concluding otherwise.
Many of these contractors are being taxed as employees. However, they are not afforded the same security and employment rights as full-time employees.
A chance to reform
Despite not being a repeal, contractors, clients and industry stakeholders will look to utilise the time now available. The delay presents an opportunity for further lobbying of the Government on issues arising from the changes.
How can George Hay help?
We will continue to monitor any further developments with interest and report on these as appropriate.
If you are concerned about the consequences that the deferral may have for you and your business, or you need advice on how you can prepare ahead of April 2021, contact our team of professionals today.
We can discuss your circumstances in more detail with you and assist you with tax planning, should this be necessary.