Postponement of IR35 due to the Covid-19 Outbreak

Last night, Chief Secretary to the Treasury, Stephen Barclay, made the unprecedented announcement that the upcoming changes to IR35 in the private sector will be postponed until April 2021. This is in response to the global Covid-19 outbreak and the effect this is having on UK businesses and the self-employed in particular.

It was welcome news to many in the contracting market who have been putting increasing pressure on HMRC to rethink the implementation. IPSE described the news as a “sensible step” to mitigate the damage to small businesses but urged the Government to do more, including an Income Protection Fund for the self-employed to cover loss of earnings. The FCSA responded to the announcement saying “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”.

Whilst the news is mostly welcomed, it leaves many in an uncomfortable position having already started to prepare for the new tax year by closing down their limited companies and either taking on permanent roles or signing up through an Umbrella company. Further to this, many large end clients have made significant internal restructuring and will now have to decide whether to undo all of these adjustments or to plough on, albeit now a year earlier than required.

Our Head of Finance, Maggie Lawson, commented:

The off-payroll rules, which were due to be introduced on 6 April 2020, would see a transfer of the responsibility of determining IR35 status, and the potential tax liabilities of the tax treatment being disputed by HMRC, from the contractor to the end client and potentially other businesses in the supply chain.

As far as we understand it, this will mean that the responsibility for determining the IR35 status of an assignment will remain with the contractor until 5 April 2021. However, it is not yet clear how end clients will move forward where they have already issued a status determination to a contractor and that contractor intends to operate on a contradictory basis.

ICS works closely with contractors, agencies and end clients and we are already engaging in discussions regarding the practicalities of the change and what this will mean for you in the coming tax year. As soon as further clarity is available, we will of course inform you.

For now, we are advising contractors to contact their agency and end client as soon as possible to see what they are planning to do. ICS offer a range of accountancy and employment solutions so regardless of your situation we will be able to support you going forward.

For advice on the most beneficial and compliant solution for you, contact your accountant, call our friendly team on 0800 195 3750 or email newbusiness@icsuk.com