The government announced that the controversial changes to IR35 will be postponed until April 2021. A move which is designed to help alleviate the pressures being imposed on businesses by Covid-19.
Steve Barclay the chief secretary of the treasury was however, quick to emphasise that this is merely a delay to the reforms and not a cancellation. Barclay stated “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 highly controversial rule changes, which are set to effect medium and large private sector businesses, switches the burden for setting the tax status of any contractors to the hiring business. This is as opposed to the current legislation where the workers themselves are tasked with determining their tax status.
The off-payroll working rules were first introduced in 2000. Designed to ensure that self employed individuals, working through their own company, pay broadly equal amounts of Income Tax and National Insurance contributions as those employed directly.
The government has extended the 2017 reform of the operation of the rules in the public sector to all medium and large organisations in April 2020. The effect of which shifts responsibility for operating the rules to the organisation that engages the worker. This is identical to how employment status for tax is decided for the vast majority of people, who do not work through their own company.
