IR35 reforms deferred
Wednesday, 18 March 2020
It was announced yesterday evening that the IR35 reforms, due to be brought in next month, will be deferred for a year. These reforms related to medium and large businesses that engage workers through intermediaries (typically personal service companies). IR35 reforms will now be deferred until 6 April 2021.
The deferral of IR35 reforms is intended to help businesses and individuals in the face of the spread of Covid-19. No doubt it will assist many who were struggling with implementation in the existing tight time frame.
However, many businesses will already have taken action to comply with the proposed IR35 reforms, by reviewing their workers’ status, amending contracts, and possibly putting such workers onto the payroll as employees. They will not necessarily be able to, or want to, reverse any of that, especially as the reforms are deferred rather than cancelled.
What the deferral does perhaps allow is a pause for breath; time to assess existing strategy and to plan more effectively during the extended window these businesses now have.
Equally, individuals who have been at the receiving end of such changes may have already seen their contracts and net pay change, and perhaps have already wound up their personal service companies as a result. For them, this may all be a bit late!
On the other hand, if they haven’t found themselves re-engaged as an employee, either by their end client or an umbrella company, the immediate threat of a deduction of PAYE and NIC from the fees paid to their personal service company may have receded temporarily.
It’s important to note, however, that existing IR35 provisions remain in place. This means that workers operating in the private sector through personal service companies still have their own obligations to assess whether IR35 applies.
Whilst for many, this is a welcome deferral, the Government remains committed to introducing the IR35 reforms at 6 April 2021, perhaps with the expectation that businesses will hit the road running!
Further guidance on IR35 is available on our website, including both for end users and contractors or intermediaries.
Alternatively, please speak to me or to your usual MHA Larking Gowen contact.