Government Postpones IR35 Rules

Amidst the coronavirus outbreak, the UK government has announced that it is delaying the introduction of new IR35 tax rules in the private sector by one year as part of efforts to protect the economy.

Speaking at Tuesday’s Budget debate in the House of Commons, chief secretary to the Treasury Steve Barclay announced the reforms to IR35 rules would now come into force on 6 April 2021. This was part of the announcement of a £330bn financial package designed to lessen the impact of coronavirus on the economy.

IR35 is legislation that affects organisations that employ contractors. Under new proposed rules, contractors working for medium or large private businesses would pay the same tax and national insurance as full-time workers with businesses having to prove that they are not performing the same role as a full-time employee.

The rules are designed to crack down on individuals that may be avoiding paying income tax, but critics say such workers do not receive the same benefits as full-time employees and it could deter businesses from hiring such workers. According to research by Harvey Nash, the new rules could see up to 20% of UK businesses stop using contractors.

The rules were due to come into force next month, confirmed as part of the 2020 Budget.