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Coronavirus forces UK government to postpone extension of off-payroll working rules

Thursday, 19 March, 2020

Extension of the off-payroll working rules to private sector employers has unexpectedly been postponed for 12 months, as part of the emergency government response to the coronavirus outbreak.

The reforms were originally planned to take effect on 6 April this year – a schedule confirmed in last week's Budget announcement. However, much has happened since then.

Chief secretary to the Treasury, Steve Barclay, first revealed the postponement in a brief aside while addressing the House of Commons on Tuesday evening (17 March). This followed an announcement from chancellor Rishi Sunak earlier in the day that a GBP350-billion support package would be made available to help businesses through the coronavirus-related economic crisis.

Barclay insisted that the change of plan was a 'deferral not a cancellation', and said the government remained committed to reintroducing the policy with a new commencement date of 6 April 2021.

His announcement was officially confirmed the following day by his Treasury colleague, financial secretary Jesse Norman. 'We will do whatever it takes to support the British economy through Covid-19', said Norman. 'The government continues to believe that it is right to address the fundamental unfairness of non-compliance with the existing off-payroll working rules. However the government also recognises that the reforms would be a significant change for both businesses and contractors.' Many contractors and freelancers affected by the extension to the private sector were at risk of losing work with no sick pay.

The delay means that a review of the reforms, currently being conducted by the House of Lords, can have its recommendations considered before the legislation goes through, although it will still come too late for some contractors and organisations to see any benefit. In the meantime, where a contractor undertakes work for a private sector engager, the contractor will remain responsible for determining the tax status of the contract. Companies that have already made changes to reflect the new rules have been reassured that their Status Determination Statements will have no standing in law and will not be used as evidence in any enquiry dispute during the coming year.

'For many businesses, this announcement will give much needed breathing space to be able to manage the impact of the reforms, particularly as they will introduce a radical new landscape, and potentially significant new tax and NIC obligations, for businesses contracting workers through personal service companies', commented law firm DLA Piper.

Law firm Proskauer Rose said the deferral was 'somewhat surprising' given the confirmation in last week's Budget that the IR35 reforms would go ahead as planned. 'It illustrates clearly just how quickly the government's priorities have changed in the past week', said the firm. 'Many contractors and their clients will breathe a deep sigh of relief, and hopefully the delay will lead to a more considered discussion about how the new rules should be implemented and the challenges that they will present.'

The Chartered Institute of Taxation welcomed the announcement but called for the deferral of more legislation scheduled to take place from next month. These include measures limiting the availability of private residence relief, and the new 30-day capital gains tax reporting and payment obligations.

Chancellor Rishi Sunak has promised to implement further measures to protect the economy if required, on top of the GBP330-billion bank-loan guarantees for small and large businesses to manage cashflows – equivalent to 15 per cent of UK gross domestic product. New legal powers have also been taken in the emergency Coronavirus Bill.

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