IR35 reforms delayed until 2021

The government has announced a one year delay to controversial changes to the off payroll working rules, due to be enacted next month, amid concerns about their potential impact during the coronavirus pandemic

In an announcement at the end of the parliamentary debate on the Budget speech, Steve Barclay, chief secretary to the Treasury, said: ‘the government is postponing the reforms to the off roll payroll working rules – IR35 – from April 2020 to 6 April 2021.

‘This is a deferral in response to the ongoing spread of coronavirus to help businesses and individuals affected.

‘This is a deferral, not a cancellation. The government remains committed to re-introducing this policy reforms to ensure that people working like employees but through their own limited company pay broadly the same tax as those employed directly.’

At Budget 2020 last week the Chancellor confirmed that the extension of IR35 reforms to the private sector would go ahead as planned. The latest announcement means the Finance Bill legislation will be amended to show the new start date of 6 April 2021, and fresh legislation will be brought then.

The reforms, which pass responsibility for determining a contractor’s status from the individual to the organisation which employs their services, were first rolled out in the public sector in 2017. Their extension to the private sector has proved hugely controversial, with claims that the rules are too complex and that HMRC’s online tool check employment status for tax (CEST) used to determine whether or not they apply is flawed.

The House of Lords economic affairs finance bill sub-committee announced at the beginning of February that it had begun an inquiry focused on the proposal to extend the off-payroll working rules.