Controversial IR35 changes to freelancer pay postponed due to coronavirus
Controversial changes to payroll regulations for freelancers have been postponed due to the coronavirus epidemic.
The rules, known as IR35, are meant to ensure two people sitting side-by-side doing the same work for the same employer are taxed in the same way.
But campaigners say they will be “catastrophic” for the contractor sector, with many large firms warning that they will no longer use freelancers to avoid the risk of falling foul of the new system.
Despite pressure from MPs across parties, the Government had confirmed they would be pushing ahead with IR35 changes from April - which they expect to generate an extra £3.1billion in tax revenue over the next four years.
But in the House of Commons on Tuesday, the Chief Secretary to the Treasury, Steve Barclay, said that decision was being reversed under plans to help business deal with the Covid-19 outbreak.
He said: “I can also announce that the Government are postponing the reforms to the off-payroll working rules IR35 from April 2020, to 6 April 2021.
“The Government will therefore not move the original resolution tonight, but will shortly table an additional resolution confirming that we will reintroduce the off-payroll working rules provisions by amending the Bill, with a commencement date of the 6 April 2021.
"This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.
“This is a deferral, not a cancellation, and the Government remain committed to reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly.”
The Tory MP Simon Fell tweeted that he was “absolutely delighted” with the news, adding: "A pragmatic and sensible approach given Covid-19 and our local businesses facing huge uncertainty."
And the move has been welcomed by the Association of Independent Professionals and the Self-Employed (IPSE), who said the Government has “done the sensible thing”.
Andy Chamberlain, IPSE’s director of policy, said: “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.”
And James Poyser, CEO of inniAccounts and founder of offpayroll.org.uk, said: “I do welcome this pause - it means that contractors can now switch gears and put all of their energy into the wider challenges we'll all going to face in the coming months.
“Whilst nobody can rest easy right now (permie or contractor), this announcement will make many contractors feel much better about the year ahead.”