IR35 private sector reforms: Finance Bill vote denies further delays to April 2021 start date

Calls to press pause

The changes were due to come into effect in April 2020, but were delayed by 12 months in response to the onset of the Covid-19 coronavirus pandemic. Even so, there have been repeated calls for the government to press pause on the changes to give the private sector business community more time to prepare.

This is on the back of concerns about the sizeable administrative burden the changes will impose on businesses, given they will have to assess the tax status of every contractor they engage with.

Ahead of the original April 2020 rollout date, there were numerous reports about how some firms were taking steps address this by banning the use of limited company contractors from their workforces completely, or had opted to classify all of their contractors as inside IR35 regardless.

With the 6 April 2021 start date now a certainty, business leaders are being urged to waste no time in preparing for the reforms, but concerns continue to be raised by contracting stakeholders about the impact the changes will have on the post-Covid-19 economy.  

John Bell, founder and senior partner at insolvency practitioner Clarke Bell, described the outcome of the vote as “disappointing” and said firms face a challenging time ahead with trying to prepare themselves against the backdrop of Covid-19.

“The pending legislation is already having a huge impact on the lives and livelihoods of contractors and we have a seen a surge in the number of enquiries from contractors seeking to close down their limited companies as a direct result of the IR35 changes.  Covid-19, Brexit and Off-Payroll combined means that the UK economy is set to suffer immeasurably in the years to come,” he added.

ContractorCalculator CEO Dave Chaplin, through his directorship of the Stop The Off-Payroll Tax Campaign, has spent the past four years fighting to stop the government’s plans to extend the IR35 reforms beyond the public sector. Now, he said, is the time for businesses to start ramping up their preparations now so they can continue to access the flexible workers they need, while complying with the rules.  

“We have already had a dress rehearsal, and many firms and contractors saw what would happen if they did not prepare properly. We now need to work together to avoid a cliff edge scenario,” he said.

“Over the next year we will be seeing more clarity from the courts, as binding authorities are released – and these are likely to favour the self-employed and provide a legal bedrock upon which firms can compliantly hire contractors, without fear of later repercussions. Provided firms work with specialists in this field, they should have nothing to fear.”

Seb Maley, CEO of contractor tax consultancy Qdos, echoed these sentiments, while urging private sector firms in scope of the legislation not to take a risk-averse approach to responding to the reforms.

“The reform is short-sighted and if mismanaged poses a risk not just to contractors but to hiring organisations and recruiters. It’s therefore up to private sector firms to prepare for the changes, which can be managed with the right approach. However, work must start immediately – I can’t stress enough how important this is,” said Maley.

“For companies to compliantly engage genuine contractors beyond April 2021, they must avoid risk-averse policy decisions and instead prioritise fair and considered IR35 status assessments. Whilst our work alone shows that thousands of businesses will be ready for the changes, many other companies - from banks to oil firms and pharmaceutical giants - should rethink how they plan to manage this reform.”