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March 18th, 2020

Following a government announcement last night IR35 off-payroll reforms have been postponed in the private sector until April 2021 in response to the outbreak of the Coronavirus pandemic. This is welcome news for many contractors and businesses that rely on the flexibility and experience of skilled contractors.

Chief Secretary to the Treasury, Steve Barclay MP made the announcement that “this deferral is in response to the ongoing spread of COVID-19 to help businesses and individuals.” It follows the government’s promise “to do whatever it takes to give the British people the tools to get through this challenge”.

“This is a deferral, not a cancellation, and the Government remains committed to reintroducing this policy to ensure that people working like employees but through their own limited companies pay broadly the same tax as those employed directly.”

 

IR35 at a glance

The Intermediaries Legislation was designed by the Government to combat tax avoidance from ‘disguised employment’ where contractors who were self-employed could provide services via a limited company, paying themselves through dividends and fall exempt from paying National Insurance Contributions (NICs).

This legislation means that contractors can no longer self-certify their own status and responsibility is handed to the client to determine whether the contract is subject to IR35. If deemed as ‘inside IR35’ then the client will need to deduct National Insurance Contributions and income tax from your pay.

This was rolled out in the public sector in April 2017 making public sector organisations responsible for enforcing IR35 when employing contractors. The legislation was meant to be rolled out in the private sector from April 2020 but instead it has been determined it is deferred for 12 months until April 2021.

 

What happens next?

Currently the Government have made it clear that the rollout of IR35 in the private sector is a deferral and not a cancellation. However that’s not to say that this legislation won’t be delayed even further. With the economic crisis as a result of COVID-19, it is unlikely that the UK economy will have recovered by April 2021.

It is still important for companies in the private sector to prepare for this rollout next April but the postponement will allow more planning time for both clients and contractors ahead of the IR35 legislation coming into place.

We are staying up-to-date with Government announcements and we are expecting further content to be published soon on this topic. The legislation implementing changes to off-payroll working is now expected to be published later this year and HMRC will be updating its Employment Status Manual to reflect this as soon as possible.

 

Please get in touch with our team for any contractor or client queries.



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