UK Government postpones changes to IR35 tax rules

Offshore workers boarding helicopter

THE UK Government has postponed the introduction of a much criticised tax reform that would have had major implications for North Sea contractors.

Steve Barclay, chief secretary to the Treasury, said the deferral of changes to off-payroll working rules would help businesses and individuals left struggling by the Covid-19 outbreak.

The rules, called IR35 and first implemented in 2000, aim to stop employees registering themselves as freelance contractors in order to pay less tax.

To improve compliance, the government in 2017 made public sector organisations responsible for determining employment status.

That same responsibility was to be extended to every medium and large private sector business in the UK from early next month.

Speaking in the House of Commons yesterday evening, Mr Barclay said the reform would be delayed by a year.

He said: “The government is postponing the reforms to the off payroll working rules, IR35, from April 2020 to April 6, 2021.

“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.

“This is not a cancellation and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly.”

Aberdeen South SNP member Stephen Flynn said of the postponement: “This suspension of the implementation of IR35 is a sensible measure from the government at a time of unprecedented concern for us all.

“We know that these changes would have particularly impacted workers within the oil and gas industry so I am glad the UK Government is being proactive on this issue.

“What we need now is confirmation as to how they intend to provide income support for individuals and families across the UK and we need those answers now – there can be no more half-measures.”

Andy Chamberlain, Association of Independent Professionals and the Self-Employed (IPSE) deputy director of policy, said:  “The government has done the sensible thing by delaying the changes to IR35 in the private sector.

“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.

“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. 

“This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.”

The latest stories