IR35 extension to private sector delayed until 2021
The government has postponed the off-payroll working changes to the private sector (IR35) until April 2021. This is in response to the rise of COVID-19. The decision was confirmed by Chief Treasury Secretary, Steve Barclay, on the evening of 17th March 2020.
At a time of great uncertainty for businesses and contractors alike, the decision removes one worry leading up to the original deadline of 6th April. Companies and trade bodies have long been calling for a postponement or scrapping of the changes.
FCSA chief executive, Julia Kermode, commented, “We welcome the news that off-payroll reforms have been delayed for 12 months, until April 2021. This is the right decision to help support businesses in these extremely difficult and unprecedented times. It is right to enable businesses to focus on the immediate complexities of responding to the Coronavirus pandemic which must be the absolute priority for everyone in the UK right now.
“However, we must reiterate that this announcement only applies to the reforms that were due to impact on the private sector from April 2020. The changes that were introduced to the public sector in 2017 are still very much applicable and will need to be adhered to.
“Furthermore, 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.”
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.
“As a strategic talent partner that operates as an extension of our clients’ operations, we’ve been heavily focused over the last 12 months on supporting our customers as they make the necessary preparations ahead of the April 6th 2020 deadline. This very same partnership-led approach will continue as we work together with our clients and candidates over the coming days, weeks and months as they restructure their IR35 plans, whilst remaining on-hand to support and guide other organisations who are unsure of the next steps and the impact that this decision – and the wider effect of COVID-19 – will have on the availability of talent.
“However, 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.
“This truly is a time for us all to come together to show strength and support for one another. We’ve been a leading authority and provider of talent solutions for more than half a century and we will continue to work hand-in-hand with our clients and candidates to provide consistency, flexibility and an expert-led approach that right now is so vitally needed.”
Matt Fryer, head of legal services at Brookson Group, added, “This postponement will be a welcome relief for contractors who are facing great uncertainty as a result of the current COVID-19 pandemic. Contractors should not be complacent, however, this is not a free pass to use a Personal Service Company for a role that has now been captured inside IR35. Since responsibility for IR35 compliance remains with contractors for the time being, they need to ensure that are meeting their obligations over the next 12 months and have a robust IR35 review from a specialist firm.
“The new date will allow businesses who have yet to adequately prepare for the IR35 changes enough time to take appropriate action, with much clearer guidance from HMRC than they have had previously. Hopefully some of the businesses who have implemented knee-jerk blanket bans on contractors will also now have time to reconsider their strategy for ensuring access to flexible expertise.
“Those end hirers that have invested in getting IR35 right are well prepared for next April and can now use the next 12 months to consider how to accommodate PSCs for roles currently thought to be inside IR35. This might include changing contracts to ensure that the roles can be considered outside and remain compliant.
“We would advise all businesses who work with contractors to build IR35 compliance into their planning for the next financial year, bearing in mind that it has taken many firms six months to prepare for the initial deadline.”
Joanne Harris, technical commercial manager at Parasol, shared, "This deferral will come as welcome news to many across the recruitment and contracting industry. However, there are concerns that this has come too late for many businesses that have already implemented their IR35 business strategy and, in some cases, issued Status Determination Statements.
"The government have made it clear that this is a deferral, not a cancellation, brought in to help businesses and individuals in light of the current COVID-19 crisis. It will be interesting to see how the business community reacts to this change, but given the current circumstances, the inherent flexibility of the UK’s contingent workforce could be more important than ever.
"The government has also reiterated that it still remains committed to this policy and it will now come into force from 6th April 2021, so it's important that the industry doesn't lose sight of the longer-term strategy."
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