COVID-19 Pushes Back IR35 Rule Changes

Wednesday March 18, 2020

With just less than 3 weeks before the scheduled implementation day of 6 April 2020 and just 6 days after the 2020 Budget confirming that the reforms would go ahead the Government has pushed back the rollout of IR35 for the Private Sector until April 2021.

What's changing?

The key points are:

  • The off-payroll reforms will now be postponed until 6 April 2021.
  • This is due to the immense business pressures of COVID-19.
  • This is a deferral of the introduction of the reforms, not a cancellation.
  • The Government remains committed to introducing this policy.

The background

Back in 2017, the rules for public bodies using off-payroll workforces changed. Basically, it was suddenly down to the bodies themselves to figure out whether IR35 applied to the people they were putting to work. It wasn't an easy decision for many organisations, and the penalties for getting it wrong scared some of them off altogether.

HMRC's Check Employment Status for Tax tool wasn't trusted and a lot of hasty blanket decisions saw legitimately self-employed people caught in the net and taxed as if they were PAYE workers - but without the rights and benefits of employees.

Despite the controversy, the same system was set to come into force for private sector businesses in April 2020, as part of the government's ongoing thumbscrew-tightening exercise on “false self-employment” tax dodging.

The reason for the delay

The recent 2020 Budget set out a policy of doing “whatever it takes” to shepherd the UK economy through the COVID-19 crisis.

In practice, that means a £330 billion effort toward cushioning the blow that the virus will cause to individuals, businesses and other organisations. As part of those efforts, the private sector roll-out of the new off-payroll working rules is being set back to April 2021, giving firms already under pressure some breathing space before the system kicks in.

The impact on business

Overall, given how unpopular the new off-payroll rules have been, the delay's being seen as a pretty positive step – albeit a fairly small one. Contractors and businesses are welcoming the extra preparation time, but kicking the IR35 ball down the road by a year won't get necessarily get it any nearer HMRC's goal of a smooth transition to the new system.

RIFT Accounting is always here to help you and we'll keep you updated on everything you need to know.

If you have any questions, or even just if you're worried about what might happen in the future, get in touch at any time.

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