IR35 Reforms delayed until 2021
- By Ross Brinsdon (TLA)
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- 18 Mar, 2020
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Great news for Freelancers
HM Revenue and Customs (HMRC) have announced that controversial IR35 reforms that were planned to be implemented from April 2020 have now been delayed until 2021, due to the ongoing Coronavirus (Covid-19) crisis.
Last month the Treasury confirmed it was pushing ahead with its reform to the tax rules, which had been criticised for potentially damaging the incomes of self-employed individuals, using small limited companies to trade under and also removing talented freelancers from the employment market altogether as they checked more permanent & guaranteed employment positions.
What is IR35?
This off-payroll working legislation, known as IR35, which for the past 20 years have prevented people avoiding paying their dues.
Reforms to it were introduced by Chancellor Philip Hammond in last year's Budget and were meant to tackle so-called disguised employment.
This is a term for those who provide freelance services through personal service companies to reduce their tax bills, but who the tax authorities believe should be treated as employees and hence be taxed at source under PAYE.
Who does IR35 apply to?
You may be affected by these rules if you are:
- A worker who provides their services via their intermediary
- A client who receives services from a worker via their intermediary
- An agency providing workers’ services via their intermediary
Why has the legislation been delayed?
The Government has postponed the controversial reforms to the IR35 tax rules until 2021.
The reason for this delay is largely because the government is trying to alleviate pressure on individual and businesses amid the Covid-19 outbreak.
Theses changes will mainly affect those working in the private sector, such as Electricians, Business Consultants, IT workers and management consultants, who pay less tax by trading via a limited company.
If the rules apply, Income Tax and National Insurance Contributions must be deducted from any income received and paid over to HMRC.
If you’re part of a working household that receives tax credits, you may be eligible for a new one-off payment of £500. The new payment is being introduced to provide extra support when the temporary increase in Working Tax Credit ends as planned on 5 April 2021.
You may get a one-off, tax-free payment of £500 if, on 2 March 2021, you were getting either:
- Working Tax Credit
- Child Tax Credit and were eligible for Working Tax Credit but you did not get a payment because your income is too high to get Working Tax Credit payments
You do not need to contact HMRC or apply for the payment. HMRC will contact you by text message or letter in April 2021 to confirm you are eligible.
If you are eligible, you should get your payment direct to your bank account by 23 April 2021. HMRC have confirmed that you will not see the payment on the online tax credit service.
The payment is non-taxable and will not affect your benefits. You do not need to declare it as income for Self-Assessment tax returns or for tax credit claims and renewals.
