UK government delays private sector IR35 reforms

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The government has announced that it will delay private sector IR35 reforms by 12 months, following widespread criticism and the coronavirus outbreak

The new private sector IR35 reforms are intended to address alleged tax abuses associated with off-payroll working. They apply to contractors as individuals who operate through their own personal services company.

In comments at the House of Commons, Steve Barclay, the chief secretary to the Treasury said: “I can also announce this evening, madam deputy speaker, that the government is postponing the reforms to the off-payroll working rules, IR35, from April 2020 to the 6 April 2021.

“Government will therefore not move the original resolution tonight, but will shortly table an additional resolution confirming that we will reintroduce the off-payroll working rule provisions by amending the bill, with a commencement date of 6th April 2021.”

Barclay added: “This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals.

“This is a deferral, 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 tax as those employed directly.”

Industry reaction

Ged Mason, CEO of the Morson Group, said: “The Treasury’s decision to delay the introduction of IR35 reforms comes at a poignant time for UK industry and will see many businesses which rely on flexible talent and contractor populations take a sigh of relief.

“Along with other industry leaders, we’ve been actively lobbying MPs and Government bodies to ensure the reforms don’t inhibit flexible working, which is a major contributor to the economy.

“This delay is therefore a sensible move and shows the government’s backing for UK enterprise by taking the necessary steps to protect businesses and the contingent workforces that they are often so reliant on.”

Mason added: “… this is very much a delay and not a cancellation, with the IR35 reforms in the private sector still due to come into force April 2021. This 12-month extension will ensure that organisations now have a major head start on successfully meeting the new 2021 deadline.”

Time to prepare for reform

Qdos Contractor CEO, Seb Maley, 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.”

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