The government has announced that the IR35 reform is to be postponed until 2021 due to the current Coronavirus situation.
This delay comes as part of a broader plan to bolster the UK economy against the COVID-19 pandemic.
However, niche contractor insurance broker and employment status specialist Larsen Howie is urging contractors, recruiters and employers not to halt plans to prepare for changes.
Commenting on the delay, Andy Vessey, Head of Tax at Larsen Howie, said, “The government’s decision is clearly the right one to make during this time of social and economic upheaval. IR35 is the least of this country’s problems at the moment so it is correct to put it on the back burner. Given though, that end clients and recruiters have now another 12 months to prepare, I would expect the 12 month soft landing assurance previously promised for this year to be withdrawn when the reform is implemented in April 2021, particularly as there will be a need to recoup as much tax revenue as possible to repair the huge dent in the Treasury’s coffers caused by Covid-19. In other words, the market has twelve months to get this right. After that, there will be strict enforcement.”
Vessey added, “For those contractors that were concerned that HMRC might take retrospective action, all bets are off now until 6th April 2021. Anyone who has received an ‘inside-IR35’ status determination, having previously self-assessed themselves as outside and which HMRC may have now caught wind of, may now find the Revenue using this time to target them over the next 12 months. We may well also see HMRC IR35 compliance activity ramped up in 2020/21 because of the fact that anticipated PAYE & NIC receipts arising out of the operation of the off-payroll rules will need to be recovered elsewhere. Contractors should therefore ensure they work with end-clients and recruiters to change their working practices, have tax fee protection or, even better, tax loss insurance in place for such an eventuality.
“End clients and recruiters should certainly not take their foot off the pedal but maintain their momentum to be well prepared for the inevitable on 6th April 2021, working to embed new tools and working practices across the entire supply chain.
“Additionally, it will be interesting to see if those larger firms that have somewhat arbitrarily imposed blanket bans on PSCs, use the extra time and pressures on their business to take a more informed and balanced approach that uses the various assessment tools and insurance solutions out there to protect their risk without unnecessarily increasing their costs or ability to deliver projects. Use this time wisely and productively.”
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