House of Lords ask to defer IR35 as COVID-19 spreads

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House of Lords ask to defer IR35 as COVID-19 spreads

The House of Lords is asking HM Revenue and Customs (HMRC) to defer the roll-out of IR35 as the economy has already taken a big hit from COVID-19.

The Finance Bill Sub-Committee which was announced on 04/2/20 has a specific focus on the extension of off-payroll working rules, chaired by Lord Forsyth of Drumlean. The House of Lords is now asking for the reform to be delayed by at least six months to a year.

On 16/03/20 Lord Forsyth at the Finance Bill Sub-Committee said:

We’ve had quite a lot of evidence from people directly affected by these proposed changes, and the summary of what is being suggested by these contractors is they will find themselves under very severe pressure financially as a result of those changes.

And I wondered whether HMRC had considered, given the enormous financial impact which we are about to experience as a result of coronavirus, whether it might not be sensible for you to defer introducing these changes at least for six months if not a year.

What is being proposed in the Budget I think is generally acknowledged to be inadequate in terms of the scale of the crisis and it does seem rather perverse to add an additional burden of this kind on business which could easily be deferred for six or 12 months.

This move has won the backing of contractor groups as Dave Chaplin, CEO of ContractorCalculator and director of the Stop The Off-Payroll Tax Campaign, said:

I applaud Lord Forsyth for challenging HMRC’s Director of Off-Payroll, Cerys McDonald, and other witnesses on the 16th March. The Lords clearly understand that the Off-Payroll Tax dishes out “rough justice” as Lord Forsyth put it, by relying on the uncertainty to encourage firms to misclassify self-employed professionals, thereby destroying perfectly good business relationships with contractors. These contractors will become vulnerable, just at a time when the whole economy is about to suffer unprecedented hardship caused by the Coronavirus. Firms will need these contractors more than ever and now is not the time to twist the thumb screws further. The Committee gets it so hopefully HMRC and Ministers will finally listen to them.

The evidence is now abundantly clear that, under the shadow of today’s announcement on COVID19, firms and individuals will be hit hard. Now is not the time to be rolling out the Off-Payroll Tax and, as Lord Forsyth suggested, it should be deferred for at least six months, if not a year.

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