Government in shock delay to private sector IR35 reform, thanks to peers and covid-19

The government has sensationally delayed private sector IR35 reform by a life-changing 12 months, after pressure by peers – and the coronavirus – made forging ahead with the April 6th off-payroll rules unjustifiable.

Steve Barclay, the chief secretary to the Treasury said: “I can also announce this evening, madam deputy speaker, that the government is postponing the reforms to the off-payroll working rules, IR35, from April 2020 to the 6th April 2021.

“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 rule provisions by amending the bill, with a commencement date of 6th 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 remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly.”

'Off-roll' rules delayed

Despite the minister fluffing his words – he twice called IR35 the “off-roll” working rules, advisers to contractors are ecstatic.

“Although the wider backdrop of COVID-19 is concerning, this is great news,” says James Poyser, chief executive of inniAccounts.

“The Lords made it pretty clear in their committee hearing that the Treasury's IR35 position was increasingly untenable, with the rising backdrop of Coronavirus. I do welcome this pause”.

'Shocked, relieved'

Status expert Rebecca Seeley Harris echoed: “Ministers have clearly already listened to the House of Lords Finance Bill sub-committee, which sent a very clear message back to them via Lindsey Whyte, one of the witnesses for HM Treasury.

“I am as shocked as I am relieved that finally contractor companies and their clients have got the delay that they need to put these measures in place.”

The founder of ReLegal Consulting added: “The government have made it clear that this is a deferral not a cancellation so it is important that businesses keep it in mind at the appropriate time, and now focus their efforts and whatever is needed to deal with COVID-19.”

'Nobody saw this coming'

IR35 specialist Seb Maley reflected: “Whatever commentators might try and claim, nobody saw this one coming, particularly given last week’s Coronavirus-dominated Budget confirmed that reform would still go ahead.

“The news will come as a huge relief for contractors, many of whom were bracing themselves for the worst.”

The CEO of Qdos Contractor also said: “I should add that it seems likely that changes will be introduced next year…[although] the extra time afforded does give private sector firms more time to prepare and successfully implement the changes.”

Despite the ‘nobody saw it coming’ verdict, IR35 expert Kate Cottrell said -- just a few hours before Mr Barclay’s announcement: “The Lords said in their session that a minister would be giving evidence on Friday.

"Well, if so and in light of the Lords' call for a delay [to IR35 reform] in wake of the coronavirus, there is a real final opportunity here for at least a six-month deferal. 

“And if I was a betting person, I suspect that if they take this opportunity they will do it before Friday -- maybe today, so the minister does not have to attend the Lords session. Fingers crossed.”

'Call off the dogs'

Recruiter Natalie Bowers reflected: “Phew! What a welcome relief this is for so many of our contractor friends and associates.

“Yes, we will have to quickly unpick the spaghetti that has been the torturous preparation for IR35 [reform] but at times like these this, it’s a welcome relief for the whole industry."

The boss of Bowers Partnership added: “At a time when the contract market is all but on its knees, I can’t think of a better piece of news. Someone has taken a very pragmatic view here -- and we have to be eternally thankful for that. Call off the dogs. Common sense has prevailed.”