A Glimmer of Hope for IR35 Reforms?

In a matter of weeks, Coronavirus has reshaped everything we thought we knew to be true. To offset the destruction caused to the economy by the virus, the government has now announced a £330bn financial package, in a bid to aid businesses and individuals. This includes a business rate holiday, furloughing, emergency loans for companies and financial assistance to airlines.

Significant for IT contractors is the treasury decision to delay IR35 tax reforms. Steve Barclay, Chief Secretary to the Treasury, was keen to stress that this is a deferral, not a cancellation further stating that the government is committed to implementing this policy next year. However, another 12 months without IR35 will no doubt offer some relief to PSCs in trying times.

Sceptics of the policy had previously declared it "no-rights employment as contractors found within IR35 could be expected to pay more tax than initially forecasted, without receiving full-time employee benefits. For companies employing PSCs, the delay will alleviate fears of increased wage bills and losing contractors to competitors. Looking ahead, companies would be prudent to use time allowed by the delay to assess fully where their PSCs fall in the scope of IR35. This could stop blanket bans being imposed by companies for fear of a tax bill, should their contractors fall in the scope of IR35. Andy Chamberlain, Director of Policy at IPSE, seconded the Government, noting that it is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.