IR35 reform gets green light for April 2021

IR35 reform gets green light for April 2021

The government's controversial changes to its off-payroll working rules have been given the green light to come into force in April 2021, despite widespread calls for the reforms to be delayed by at least two years. 

As part of the Finance Bill passed through parliament yesterday (May 19) Conservative MP David Davis campaigned for an amendment which would see the rules  — commonly known as IR35 — be delayed until 2023/24, particularly in light of the economic impact of the coronavirus pandemic. 

But MPs failed to vote on the amendment, meaning the changes are one step closer to being introduced in April 2021 as the bill moves to the committee stage within parliament. 

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The changes, which would see every medium and large private sector business in the UK become responsible for setting the tax status of any contract worker, were originally set to take effect from April 2020 but the move was delayed by the government until next year in light of the coronavirus crisis. 

Dave Chaplin, director of The Stop The Off-Payroll Tax Campaign, said: "It signals an entrenched and tin-eared approach by a government that is failing to listen to the people, failing to heed the damning findings expressed by the Lords in its recent report, and failing to listen to the legitimate concerns of the senior members of its own party.  

"To bulldoze ahead with this damaging legislation at a time of national crisis beggars belief. The government should be supporting businesses right now, not hampering them and, in turn, inflicting harm on the entire UK economy.

"Pressure is now building as we head to the committee and report stages of the Finance Bill and we will be continuing to campaign on behalf of the UK’s contractors and freelancers to prevent the legislation entering statute in its current form."

Currently the off-payroll rules only apply to the public sector but the Treasury has always maintained reform was necessary to address "fundamental unfairness" surrounding non-compliance, despite widespread calls for the changes to be scrapped altogether. 

Last month a Lords select committee urged the government to "completely rethink" the IR35 rules in a damning report which found the changes would put too great a burden on businesses and was unfair on contractors.

The report found the support offered by the taxman fell "well short" of what was required, adding that large- and medium-sized businesses were being made responsible for enforcing a regime HMRC had "struggled with for 20 years". 

Introduced in 2000 IR35 is an anti tax avoidance rule that applies to all contractors and freelancers who do not fall under HMRC’s definition of being self-employed.

Seb Maley, chief executive of of IR35 specialist Qdos, said: "It’s a big disappointment that IR35 reform will not be delayed, but then again it’s of no real surprise that the changes will go ahead next year.

"The government has buried its head in the sand when it comes to IR35, continually ignoring compelling arguments that call for a rethink of the legislation.