It Took a Pandemic, But Contractors Have Won an IR35 Reprieve

  ED TARGETT 17TH MARCH 2020

12 more months…

Where vocal protests from the UK’s sizable contractor community failed, a pandemic has succeeded: Steve Barclay, chief secretary to the Treasury, this evening confirmed that reforms slated for April 6 which would make employers responsible for determining the tax status of contractors have been delayed for 12 months.

Steve Barclay MP said: “The government is postponing the reforms to the off payroll working rules, IR35, from April 2020 to April 6, 2021. This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.”

He added: “This is 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.”

Many of those who have been affected by large companies making blanket determinations about their tax status may find this too late: businesses have taken the opportunity to thin out work forces and offshore further.

For employers, however, it is likely to be a welcome chance to retain flexibility in how they staff IT contracts for another year, giving them elasticity in how they skill-up and skill-down projects without the fear of facing sanctions from HMRC if they are found to have misdetermined the status of their contractors.

Dave Chaplin, CEO of ContractorCalculator, who has led a campaign against the legislation, said: “We must now keep pushing for changes to outlaw the disgrace of ‘zero rights employment’ and to make it illegal for firms to push employer’s taxation onto contractors… Over the next year, it’s time to… come up with a way to properly recognise contracting and freelancing in the tax system and ensure people are either classed as self-employed or are employees with full rights and benefits”.

IR35 Delayed as Part of Package of Measures from Treasury

The move came as part of a sweeping package of emergency measures announced by the Treasury these evening in a bid to combat the mounting economic impact of the shutdowns caused by the COVID-19 pandemic globally.

These include providing £20 billion of business rates support and grant funding to help the most-affected firms manage their cashflow, including a 100 percent business rates holiday for the next 12 months for the retail, hospitality and leisure businesses; part of a broader £330 billion package of guarantees – equivalent to 15 percent of UK GDP.

James Poyser, CEO of inniAccounts and founder of offpayroll.org.uk, has been vocal in protesting the IR35 plans — which many say will decimate a sorely needed flexible and experienced workforce across the IT sector. He said in an emailed comment: “The Lords made it pretty clear in yesterday’s committee hearing that the Treasury’s IR35 position was increasingly untenable, with the rising backdrop of Coronavirus.

“I do welcome this pause – it means that contractors can now switch gears and put all of their energy into the wider challenges we’ll all going to face in the coming months. Whilst nobody can rest easy right now (permie or contractor), this announcement will make many contractors feel much better about the year ahead…

He added: “This will also give time for the Lords review to be published, and we hope that the Treasury and HMRC listen to their recommendations before attempting to re-table this legislation for April 2021.”

HMRC had faced brutal criticism in the Lords yesterday, with peers tearing into the proposed changes over their impact on contractors.

How has IR35 affected you, your PSC, or your business’s IT project? We are particularly interested in hearing from those working IT projects. Contact us with your thoughts and experiences.