DELAY TO IR35 REFORMS – WHAT HAPPENS NOW?
Off-payroll reforms delayed to April 2021
Here, Chris James looks at what this means to contractors, agencies and end hirers.
Last night, the Government announced a last-minute delay to the implementation of the new off-payroll rules into the private sector. This came just six days after they were quietly confirmed as coming in on time, on page 88 of the ‘red book’ – the document containing the Budget measures Rishi Sunak announced last week.
Clearly, we are dealing with unprecedented pressures on our economy and society as a whole. From that point of view, not introducing this extra complication right now is a logical step overall.
What has been announced is that the introduction of the off-payroll rules in the private sector, and the amendments to the rules in the public sector, will not happen on 6 April 2020. Instead, the law is still to be published, but with a start date of April 2021 instead.
I’ve long campaigned for changes and a delay to the implementation of the off-payroll rules. I speak with policy officers at HMRC regularly to hold them to account. I’ve met both my former and current MP regarding off-payroll and the Loan Charge, with some success. So a delay to the implementation is welcome from one point of view. But of course, this change of heart now is driven by Covid-19, a hugely impactful issue with many consequences. In addition, many larger end users have already changed systems and processes to accommodate the new rules.
- The changes will happen on 6 April 2021, not 6 April 2020, in the private sector.
- In the public sector, the rules will change to align to the new private sector rules, in April 2021 too.
- SDSs done to date will have no legal status – these will need to be done on the contracts and working practices in place in April 2021 – effectively ‘done over’.
- HMRC do not intend to pay any attention to SDSs done to date when considering if a contractor is currently inside or outside (I recommend waiting for some written confirmation of this).
- Official confirmation of the delay was given in parliament on the 17th of March – something in writing should appear online today / tomorrow.
- Agencies and end users in the private sector therefore have no new responsibilities from 6th April 2020, and no new liabilities to consider.
- Agencies and end users should prepare for an April 2021 start – but this time we will have had the final legislation for many months before implementation.
- Contractors who have been told not to use their PSC, or that they are ‘inside’ on the new rules, should speak to their agencies (and possibly end users) to see what the situation is now.
- Contractors using PSCs in the private sector should apply the ‘old IR35’ rules (Chapter 8) for the 20/21 tax year as they do today.
- As ever, don’t pretend to be outside IR35 if you’re actually inside…
We at JSA are very well placed to advise our agency partners and their end users, as well as contractors, about the changes. We’ll be working hard over the next 12 months for improvements to the law, and a better implementation, by using the extra time to work with everyone for a better result.