NEWS20 March 2020

IR35 reforms delayed due to Covid-19

Covid-19 Finance News UK

UK – The government has postponed its reforms to the IR35 tax rules for 12 months as part of plans to alleviate pressure on businesses.

Freelancer tax IR35_crop

The changes to how off-payroll freelancers are taxed will now be implemented from 6th April 2021, instead of April this year.

IR35 reforms mean freelancers are taxed in the same way as permanent employees. Medium and large organisations will be responsible for determining the tax status of contractors and making sure the right tax is paid, and it will not be possible for freelancers to operate as limited companies because they work for several employers. The changes have already been applied in the public sector.

Jesse Norman, financial secretary to the Treasury, said: “We will do whatever it takes to support the British economy through Covid-19. That is why, as well as the current support measures we have announced, we have delayed the off-payroll working reforms to April 2021.”

The Institute of Practitioners in Advertising (IPA) welcomed the delay to the reforms. Finance director David Clasen said: “The IPA has been campaigning for better execution of this reform and, whilst we still have reservations about the details, in particular the operation of the CEST tool, we welcome this postponement.”

Liz Norman, founder of Elizabeth Norman International, wrote in an article on the potential implications of IR35 on the market research sector earlier this month: “The insight industry has traditionally relied on large numbers of freelancers. It facilitates the ad-hoc nature of a lot of the work, allows the industry to bring in specialist skills when needed, and means a lot of experienced professionals can work flexibly to accommodate other important things in their lives.

“IR35 won’t stop the freelance market altogether, but many believe it will curtail it, resulting in changes for both employers and employees choosing to work in that way.”