Welcome delay to IR35 reforms
Apr 15, 2020
IR35 reforms in the private sector were due to be rolled out on 6 April 2020, and had already proved to be a contentious issue. So the decision to delay the implementation of these changes because of the coronavirus pandemic has come as very welcome news.
Amongst a host of other announcements made on 17 March in support of businesses, Chief Secretary to the Treasury, Steve Barclay, said that the reforms will be pushed back to 6 April 2021. This delay to IR35 came in response to growing calls for the Government to offer support to the self-employed and freelancers during the crisis caused by Covid-19.
But before anyone gets too excited, Barclay stressed that this is definitely “a deferral, not a cancellation, and the Government remains committed to reintroducing this policy”.
The announcement will have brought comfort to many freelancers working in the private sector. Business experts are of the opinion that the Government has done the right thing under the circumstances, as rolling out needless tax changes would be foolhardy given the economic challenges that lie ahead.
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed) said:
“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.
“It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses. “
Time to prepare
The benefit of this delay is that it will give private sector firms vital extra time to make sure they are fully prepared for the IR35 reforms.
There have been a raft of employment law changes coming into effect recently, and in light of such a rapid pace of legal change it’s really important to follow professional advice and ensure you’re keeping up to date.
For some though, news of the delay has already come too late. Some businesses, particularly bigger companies which employ a large number of contractors, have already started to implement the IR35 reforms. As a result of this, a significant number of contractors have already had their contracts terminated.
Could IR35 reforms be scrapped?
Despite the Government’s declaration that IR35 reforms are being delayed rather than cancelled, some business experts are still holding out hope that the year-long deferral will result in the changes being scrapped altogether.
The delay will provide sufficient time for the House of Lords review to be published, with the hope that any further recommendations will be listened to and adopted by HMRC before the legislation goes through in time for April 2021.
Another concern raised is the costs which have already been associated with implementing the IR35 reforms. Julia Kermode, Chief Executive of the Freelancer & Contractor Services Association (FCSA), said:
“We are aware through our evidence submitted to various government bodies, including the House of Lords, that some businesses have spent in excess of £700k in preparing for the private sector reforms which illustrates only the tip of the iceberg of the cost to businesses and the economy.
“I very much hope that some detailed analysis of the wider implications of this reform can be undertaken in the coming months in order to establish whether or not it should be scrapped entirely, rather than simply ploughing on in 12 months’ time.”
The economic landscape will no doubt look quite different by the time we reach April 2021, but it’s important not to forget about IR35 reforms in the private sector as they are highly unlikely to go away. Make sure you allow enough time to make any necessary changes, and if you have any queries or concerns about implementing them please do get in touch.