IR35 has been postponed, the next steps you should take

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IR35 has been postponed, the next steps you should take

Following the Government’s announcement that IR35 will be suspended for one year due to the spread of COVID-19, a law firm has outlined the next steps firms should take with this extra year that has been given to them

Stephen Barclay, chief treasury secretary announced on the 17/03/20 in the House of Commons that the legislation will be pushed back from 6th April 2020 to 6th April 2021. Baker McKenzie has put together a client alert on the next steps for businesses:

  • Determinations already made -“for clients that have already made determinations, they can (and should) confirm to contractors that they are not making any changes to the way in which contractors will be taxed in advance of 6 April 2020. However, it is important to avoid suggesting to contractors that they can ignore the determinations, or that the determinations themselves have been rescinded.”

 

  • Challenges already received – “any challenges to status determinations received from contractors made can be put to one side. As set out above, clients should confirm to contractors that no changes are being made to the way in which contractors will be taxed and that fresh determinations will be made in advance of the April 2021 deadline, based on the facts and working patterns in place at that point.”

 

  • Unwind changes in structure? – “given that this is only a year’s reprieve and not a complete about turn by the government, those clients who have already made changes to their supply chain (for example by removing personal service companies) may choose not to go through the time, expense and hassle of unwinding those changes. Whilst such changes may result in contractors being paid net of tax, there may be other benefits such as, in some cases, the right to statutory sick pay.”

 

  • Move forward or press pause? – “if clients have not already made changes to their supply chain, they may choose to delay until the end of this year. However, clients should remember that the April 2021 deadline will come round swiftly and so they should diarise well in advance the preparations required for implementation.”

 

In December 2019, Stephen Ratcliffe, partner at Baker Mckenzie told HRreview that 90 per cent of contractors are inside the IR35 rules and will be affected by them.

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