The UK and the world has come under pressure from the Covid-19 pandemic and as a result the government has announced it will delay changes to the controversial IR35 tax legislation for a whole calendar year.
In April, the IR35 tax legislation was due to see medium and large private sector businesses forced to set the tax status of certain contractors and freelancers. Previously this tax status was decided upon by contractors and freelancers. This legislation is expected to cause confusion and upset for Britain’s evolving gig economy will allow the HMRC to collect additional payment where a contractor is an employee ‘in all but name’.
Once the change is implemented, contractors who had previously seen fit to trade job security and benefits for a slightly higher salary will be forced to pay the same tax and National Insurance contributions as full-time employees do. As a result, contractors will then in essence be doing the same work, but for less.
The controversial legislation has been postponed by governments just weeks before it was due to come into force. The postponement is expected to be for another year, in a bid to protect the economy against the coronavirus outbreak. Recently Chief Secretary to the Treasury Steve Barclay announced a year-long reprieve for contractors, as the reforms to IR35 off-payroll working rules will now come into effect on 6th April 2021.
In a comment to the press, Victoria Goode, a Consultant Partner at professional services firm Lewis Silkin stated, “This is a welcome move by the government. It gives business the flexibility in these uncertain times to continue to use contractors who are providing their labour via personal services companies or partnerships – PSCs – crucially without the additional employer NIC… It also relieves businesses of the administrative headache of assessing status… However, for businesses who have traditionally used PSC contractors and are well-advanced in their IR35 preparations, the changes may come too late.
Goode added that with so little time before IR35’s changes were due, many businesses may have already terminated arrangements with contractors, or employed contractors in-house. At this point, those businesses may not be able or willing to unpick their new arrangements.