In a surprise announcement last night, the government has delayed the implementation of IR35 changes in the private sector for one year.
The tax rules designed to combat disguised employment in situations where an individual contractor is providing their services via their own intermediary were to be changed from 6 April 2020.
The reforms would have meant that responsibility for assessing whether the contractor would be an employee for tax purposes if they were hired directly would have needed to have been made by the end user rather than the intermediary.
This had led to some end users declaring that they would stop using off pay-roll contractors and for many contractors to fear that they would lose out financially if they were treated as employees.
The last-minute decision to stop the process has been made because of the increasing financial hardship caused by COVID-19 to businesses in the UK. The changes have been rescheduled for April 2021. Whether there will be further delays or even changes to the reforms remains a possibility given the impact that COVID-19 is having.
Given this uncertainty it will be sensible for contractors and their clients to retain their existing pre-April engagement terms and keep developments under review.
Where an employment business has already signed up to terms which require them to put workers on payroll due to a determination that IR35 applies, contact should be made with their clients as soon as possible to agree if these arrangements can be changed due to the reforms now being delayed.