IR35 reforms postponed for a year

The government has postponed changes to off-payroll working (IR35) rules, set to take effect in April, for a year in light of the Covid-19 crisis.

“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals,” Steve Barclay, chief secretary to the Treasury, said on Tuesday night.

“This is a deferral and 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 amount of tax as those employed directly.”

The rule change, announced in the 2018 Budget, is now expected to come into force on 6 April 2021. It proposes to make medium and large-sized private sector organisations responsible for determining the tax status of contractors and ensuring that the right employment taxes are paid.

Off-payroll working rules, known as IR35, were introduced in 2000 to ensure that someone working like an employee, but through their own limited company, pays broadly the same tax as someone employed directly.