IR35 to be delayed to 2021 due to COVID-19

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IR35 to be delayed to 2021 due to COVID-19

The extension of IR35 to the private sector has been delayed by a year, due to the uncertainty COVID-19 has brought with it.

Stephen Barclay, chief treasury secretary announced this on 17/03/20 in the House of Commons that the legislation is to be pushed back from 6th April 2020 to 6th April 2021.

Mr Barclay said:

This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.

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

The House of Lords asked HM Revenue and Customs (HMRC) to consider doing this through Lord Forsyth of Drumlean. 

Contractor groups have welcomed this news.

Seb Maley, CEO of Qdos, who offers insurance and tax advice for the self-employed said:

The Government has seen sense and made the right call in these unique circumstances. 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.

That said, this is only a delay, albeit a very welcome one. It does, however, give private sector firms vital time to prepare for reform, which can only be a good thing for contractors. What matters now is that businesses use this time wisely.

Stephen Ratcliffe, partner in the employment practice at Baker McKenzie said:

This is a startling announcement by the Government, coming after repeated statements that these reforms would not be postponed.  With only a little over two weeks before they are due to take effect, clients of personal service companies can pause their preparations, albeit only temporarily, and focus their attention on more pressing matters.

This extra year gives all parties involved extra time, like improvements made to Check Employment Status Tool (CEST). Nigel Morris, employment tax partner at MHA MacIntyre Hudson said:

The jury is still out on the CEST – it’s been given a resounding vote of ‘no confidence’ by users and their advisers. It will be an important tool for those involved with IR35, but the recently released revised version still appears to be flawed. Improvements would make for a much smoother adoption process.

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