IR35 Reforms delayed until 2021

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.