Government to plough ahead with IR35 tax reforms

Chancellor Rishi Sunak confirmed that the controversial changes will come into effect next month

The government has quietly confirmed that the controversial off-payroll working rules - also known as IR35 - will come into effect on 6 April.

Chancellor Rishi Sunak did not mention IR35 during his Budget speech, but the details were confirmed in the full document, which stated that the review of the reforms announced earlier this year had been completed.

"The government has recently concluded a review of the reform and is making a number of changes to support its smooth and successful implementation," reads the statement.

"The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced."

The IR35 changes will shift the responsibility of determining employment status from workers to the organisation hiring them.

This means that self-employed individuals who are contracted by a company and operate like the company's employees will pay the same income tax and National Insurance contributions as those employees, regardless of the structure through which they work.

HMRC expects the changes to bring in £3.1bn of additional tax revenue between 2020 and 2024.

James Milligan, director of digital technology for UK and EMEA at Hays, urged employers and contractors to continue preparing for the transition.

"As we await further details of IR35 in the upcoming finance bill, organisations need to continue with their preparations for IR35 to avoid being exposed to increased costs and workloads, as well as a loss of key talent," he said.

"Organisations that aren't prepared risk losing highly skilled contractors to organisations that are, which in turn could affect reputation with contracting talent and delay projects."

When the review of the reforms was announced in January, some called it "hasty and inadequate" and questioned the integrity of having a completion date of less than two months later.

Seb Maley, CEO of IR35 compliance specialist Qdos, called the move to continue with the 6 April start date a "needles, short-sighted tax grab" from the government. He warned that it is the wrong time to introduce the changes as contractors and organisations grapple with the eventual financial fallout of the coronavirus.

"Given the alarming threat coronavirus poses to the economy, this is not the time to introduce reform that has the potential to irreversibly damage the UK's contractor workforce," he said.

"But while these reforms are disruptive, complex and unfair, they can be managed. And the reality is they will be enforced in a matter of weeks. Businesses need to be prepared, pragmatic and ready to make well-informed IR35 decisions."

Mark Dexter, CEO of tech recruiter KDR Recruitment, called the confirmation disappointing.

"I am extremely disappointed to see that the government has ignored the concerns of businesses and is pushing ahead with expanding the IR35 reforms," he said.

"This is a very uncertain time for businesses and the government should be doing everything it can to reduce the stress and confusion they face rather than adding to it."