In a surprise U-turn, the UK government has announced it will delay the controversial off-payroll working rules for a year as it prioritises the financial fallout from COVID-19.
IR35 was set to come into effect on 6 April and last week's Budget maintained this position.
The reforms would switch the burden of responsibility of determining employment status from contractors to the organisation hiring them. They were implemented in the public sector in 2017 and were due to come into effect for the private sector this year.
However, chief secretary for the Treasury Steve Barclay told the House of Commons that the reforms would now come into effect from 6 April 2021.
This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals," he stated.
"This is a deferral, not a cancellation, and the government remains committed to reintroducing this policy to ensure that people working like employees, but through their own limited company,, pay the same tax as those employed directly."
The news came as the chancellor Rishi Sunak announced a £330bn package for businesses and homeowners to cushion the eventual financial impact of the outbreak.
Simon Winfield, UK&I MD at global recruitment firm Hays, welcomed the delay but said that the postponement of a year is insufficient to accommodate for the current changes caused by the crisis and called for the changes to be dropped entirely.
"Businesses are facing unprecedented challenges in the months ahead, so we welcome the much-needed IR35 delay. However, the world is changing materially, and a 12-month delay isn't sufficient," he stated.
"There's no questioning the intent behind the reforms, but there are many unanswered questions and as they stand, the potential for non-compliant umbrella firms to continue to flout the regulations is significant and needs further consideration. We continue to call for the reforms to be scrapped in their current form and ask that the focus instead shifts to creating far simpler and fairer legislation.
"As the legislation is delayed for a year it will allow private sector organisations more time to consider the best way of resourcing, decide on their approach and communicate effectively with contractors. Further disruptions and distractions aren't what anyone needs right now."
Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) called it a "sensible" move by the government.
"These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned," he stated.
"It is right and responsible to delay the changes to IR35 for at least a year during the coronavirus crisis, to reduce the strain and income loss for self-employed businesses.
"This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK's crucial self-employed businesses afloat."
Seb Maley, CEO of IR35 specialist Qdos Contractor, added: "This is only a delay, albeit a very welcome one.
"It does, however, give private sector firms vital time to prepare for reform, which can only be a good thing for contractors. What matters now is that businesses use this time wisely."
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