With Covid-19 at the forefront of everyone’s minds, HM Revenue & Customs has confirmed a delay to changes to the IR35 rules, due to expand to the private sector from April this year.
This is a welcomed delay for many, but for others it will be frustrating news that’s come close to the wire as they will have already made alternative arrangements for some contractors and introduced new IR35 processes.
A delay may immediately seem like good news, however if you have already made changes ready to comply with the new regulations then it is important that these are carefully reviewed and that this is not seen as a green light to simply push everything back 12 months.
If you have already issued contractors with Status Determination Statements to show that you consider them to be ‘caught’ by IR35, then it is not simply a case of these being unenforceable until 2021. Continuing to engage with the PSC without the PSC deducting PAYE/National Insurance contributions (NICs) itself could lead to exposure to wider tax avoidance provisions on the basis that you have clearly formed the view that the engagement falls within IR35.
If you have ‘banned’ engagements with PSCs from April, then there could be considerable costs associated with reversing this decision and then going through the process again ready for April 2021, and so you may wish to proceed as planned in spite of the delay.
Changes made to contracts in preparation for the original deadline should also be reviewed to ensure they are not reliant on legislative changes that now do not take effect for another 12 months.
In summary, although this delay will be good news for many clients and allows time to ensure you are ready, those who have already taken steps need to give careful consideration to how they proceed.
It is clear that this is a postponement to April 2021 and not a cancellation, as the government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly. Therefore, businesses need to use this extra time wisely to ensure they are IR35 ready by April 2021.
We will keep you informed should any further considerations be required as the situation develops.
If you have any queries about the changes, please speak to your usual Saffery Champness contact.