Private sector off-payroll working (IR35) suspended for a year due to COVID-19 crisis

A brief look at off-payroll rules for the private sector

Off-payroll rules were first introduced in the public sector in April 2017. In 2018, the HM Treasury Budget confirmed the rules were being extended to the private sector from 6 April 2020 for medium and large businesses who engaged individuals through intermediaries.

Where the rules apply businesses are required to assess the terms of their working engagements with such individuals and they are required to issue a status determination on whether tax and NIC needs to be deducted by the business, agency or third party actually paying the personal service company.

Read more about an analysis of IR35 by Alan McCann, DTE Head of Tax Dispute Resolution here.

What changes have taken place?

Amid the coronavirus crisis, the Treasury has announced that the extension of the off-payroll working rules to the private sector will now be delayed for a year, until 6 April 2021.

Steve Barclay, Chief Secretary to the Treasury, said on Tuesday: ‘This is a deferral in response to the ongoing spread of coronavirus to help businesses and individuals affected’, and went on to emphasise that this is a deferral and not a cancellation.

The delay is an acknowledgement that contractors and freelancers are among the people most likely affected by COVID-19 due to lack of work. Therefore, this move by the Government came as a huge relief for these taxpayers, as well as the medium and large businesses they ultimately undertake work for, who will not be required, for the time being at least, determine the tax status of a contractor/freelancer they hire.

Commenting on this delay, Alan McCann, said: ‘It is clearly a welcome step as Covid19 starts to show its enormous impact not just to public healthcare but to businesses of all sizes as well, contract work will likely become the first types of cost to be cut, risking the livelihood to numerous contractors and freelancers. It will allow businesses to focus more on other important day-to-day business activities’.

If you have a question on IR35/private sector off-payroll working, please contact DTE Tax Advice or one of our advisers directly.