The IR35 rules aim to catch contractors who provide their services through a limited company or other intermediary for tax purposes, and who would otherwise be treated as employees. The government had aimed to extend IR35 to medium and large companies in the private sector, but will now not do so until 6 April 2021.
David Greenhalgh, employment partner at Joelson solicitors, said: ‘From the outset IR35 has been mired in controversy because there is a considerable lack of clarity in both the original legislation and HMRC’s guidelines.
‘Indeed, even HMRC’s own Check Employment Status for Tax (CEST) tool is widely viewed as unfit for purpose and inaccurate, with businesses using the tool reporting they have received indications that IR35 would not apply when it clearly would have. The significant economic and social impact of the COVID-19 crisis has allowed the government to save face by u-turning on a legislative change that was ill-conceived and rushed through.
‘With this delay, businesses and individuals contracting through an intermediary must take time to familiarise themselves with exactly what is expected of them, when IR35 is eventually introduced to the private sector.’
Miles Dean, head of international tax at Andersen Tax UK, said: ‘Thankfully, common sense has prevailed.
‘It’s a shame it took coronavirus for the government to take this action. One hopes that a proper review is undertaken, and consideration given to scrapping the reforms altogether.’
Stephanie Wilson, partner and head of employment tax at BDO, said: ‘The key message is that this is a deferral of the new rules not a cancellation.
‘Once more information has been provided by HM Treasury about the postponement, we will be in a better position to provide a more comprehensive view on the potential impact this change will have on affected organisations businesses. However, it is clear that this further delay to the start date does allow individuals and organisations time to fully prepare themselves for the new rules, including the ability to engage with all relevant parties to effectively implement all necessary change.’
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