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Contractors and businesses given lifeline as government delays IR35 reform by 12 months

2-minute read

Contractors and businesses given lifeline as government delays IR35 reform by 12 months
Sam Bromley

Sam Bromley

19 March 2020

Although the Chancellor previously announced that IR35 reform in the private sector would be introduced as planned on 6 April, the government has backtracked amid the ongoing coronavirus pandemic.

The government has done the “sensible thing” on IR35 reform

Steve Barclay, Chief Secretary to the Treasury, announced on 17 March that reform will be deferred by a year – but made it clear it isn’t being cancelled. He said: “This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals.”

It comes after a House of Lords finance bill sub-committee said that adding another burden on business would be “perverse”.

Unsurprisingly, the delay has been welcomed by the industry. Andy Chamberlain, Director of Policy at IPSE, said: “These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.

"It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.”

But some contracts have already been terminated

In October we reported that big businesses were responding to the upcoming rule change by taking a ‘blanket’ approach, meaning contractors working through a personal services company were being told to go on the payroll or quit.

While contractors have welcomed the 12-month deferral, iNews reports that the delay has come too late for those whose contracts have already been terminated. They quote pensions specialist Sara H, writing on LinkedIn: "Contracts have already been terminated by the employers in anticipation of this legislation and no one is employing for obvious reasons."

Not the right time to roll out “needless tax changes”

Private sector IR35 reform means that contractors and freelancers will no longer be responsible for working out their tax status. Instead, it’ll be down to the clients they work for (although smaller businesses are exempt from the change).

But the change has been controversial since the government first confirmed it was extending existing public sector rules to the private sector. For example, the government’s January IR35 review was called 'disappointingly hasty and inadequate'.

Tim Stovold, partner at Moore Kingston Smith, said: "This decision should have been made well in advance of the April 6 launch date but coronavirus has finally convinced the government to delay this catastrophic change to the IR35 rules.”

As businesses and the self-employed now face an uncertain few months, the deferral at least should give them more time to prepare for reform.

Seb Maley, CEO of Qdos Contractor, said: “Given the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.”

He added that what matters now “is that businesses use this time wisely.”

Read the government's IR35 announcement at gov.uk.

What do you think about the government’s decision to delay IR35 reform in the private sector? Let us know in the comments below.

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