IR35 tax reforms put on hold

The introduction of controversial IR35 tax reforms has been delayed by a year as a result of the coronavirus pandemic.

The decision was announced along with a £330bn financial package for the UK economy that includes a business rate holiday and emergency loans for companies.

It is a delay that will be welcomed in most quarters. Even before the current situation there had been calls for the measures to be put on hold.

There had been growing concern from a number of sectors over the new tax regulations for self-employed workers and the risk of them damaging the economy.

According to some industry bodies the changes will lead to a third of self-employed contractors stopping freelancing over non-compliance fears.

Also known as ‘off-payroll’ the rules allow HMRC to tax sole traders as employees if it deems their working arrangement are akin to regular staff.

Figures show that the rule change will affect some 230,000 contractors in the UK. And sectors heavily reliant on freelancers have raised growing concerns over its impact.

The rules are intended to tighten non-compliance with off-payroll working regulations. They shift responsibility for determining the tax status of contractors from the workers to the end users – in this case, private sector medium and large organisations and charities.

Announcing the delay, the Chief Secretary to the Treasury Steve Barclay said: “The government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021.”

He said the suspension was in “response to the ongoing spread of COVID-19 to help businesses and individuals,” but insisted it will still go ahead as planned the following year.”

However, he stressed: “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.”

And that is the important thing to take from the announcement – these reforms are still planned to go-ahead.

And though it has moved down the priority list, given everything else that is happening at the moment, businesses that will be affected still need to plan for next April.

To discuss how the rule changes will affect you please contact me on 01772 430000