The government has postponed the controversial reforms to the IR35 tax rules until 2021 in a bid to support businesses and individuals navigating COVID-19.
The legislation, which would have seen medium and large private sector businesses in the UK become responsible for setting the tax status of contract workers from April 2020 had been fiercely opposed in the past few months with calls from many for the reforms to be scrapped.
But in an unexpected announcement to the House of Commons last night, Steve Barclay, the Chief Secretary to the Treasury confirmed that the reforms would now be postponed until April 2021. The MP was keen to emphasise that this was not a cancellation of the policy however, but merely a delay to keep the economy moving.
In his address Mr Barclay said: “I can also this evening announce the government is postponing the reforms to the off-payroll working rules, IR35, from April 2020 to the 6th of April 2021.
“This is a deferral in response to the ongoing spread of COVID-19…This is a deferral not a cancellation and the government remains committed to reintroducing this policy.”
What does this mean?
While the IR35 legislation is already in place in the public sector, the reform would have introduced the same rules into the private sector in a bid to ensure that contractors working like employees through their own limited company pay the same tax as those employed directly. With the current economic climate, this change was concerning for many businesses and contractors alike who were already worried about their next opportunity.
Joint MD of Harris Lord, Justine Harris said: “We were so pleased to hear that the reform to the off-payroll working rules is to be delayed for one year. This postponement is a welcome break that will help contractors and businesses outside of the public sector press on through economic uncertainty. This will provide some comfort to the freelance population who’re undoubtedly concerned about employment amidst COVID-19.”
We feel that the government’s stance on IR35 has shown real pragmatism and will support both businesses and contractors to help get the economy moving against once we’ve weathered the COVID-19 storm.