A collective sigh of relief could be felt last night when Steve Barclay, the Chief Secretary to the Treasury, announced a surprise one year delay to the implementation of the controversial Off-Payroll Working rules (commonly known as “IR35”) to 6 April 2021.

This came only six days after the Government confirmed in the Budget that IR35 was going ahead as planned on 6 April 2020. These are however unprecedented times, with the coronavirus pandemic, and so disruption and fast-changing Government policies are to be expected for the foreseeable future.

This decision will provide some much needed breathing space for businesses up and down the country who are suddenly facing significant business challenges due to coronavirus, many of which were struggling to be ready for the IR35 changes as it was. Contractors will also welcome this delay. Many are currently experiencing a downturn in projects with no entitlement to statutory sick pay. Postponing the IR35 changes for a year will help contractors to avoid the double whammy of also taking a significant reduction to take-home pay when forced to be paid via payroll as an ‘Inside IR35’ worker.

From an adviser point of view, I think that this is the right move by the Government, it is just a shame that it took a worldwide pandemic to force this to happen. We are only a few weeks away from the original implementation date, yet we have no final legislation, HMRC guidance is still work-in-progress and there remain too many unanswered questions on the practicalities and technical detail behind the tax changes. Postponing the implementation by 12 months not only gives the Government ample opportunity to refine legislation and guidance so that it is clear and fit-for-purpose, but it also gives businesses sufficient time and space to properly understand and prepare for these changes before they become law.

What about those businesses that have already undertaken significant work to assess their contractor population over the last few months or have changed business models in readiness for the IR35 changes? I don’t think those businesses should rush to unravel everything at this stage. Whilst some short term gains may be possible by moving back to the Business as Usual model for contractors, next April will be here before we know it and so it may be more beneficial in the longer term to continue with the strategies and approaches formed, albeit possibly with some interim measures, rather than going through the same pain again in the run up to April 2021. Care is also needed in relation to the tax compliance position for those contractors that are clearly going to be ‘Inside IR35’ when the new legislation is operational, particularly around the responsibilities imposed on all businesses by the Corporate Criminal Offence legislation.

In summary, yesterday’s announcement is a positive and sensible step given the current climate. It will provide some much needed respite for businesses and workers who are impacted by recent events. That said, the IR35 changes are not going away and businesses should be mindful of this extra time to be as prepared and ahead of the curve as they can be for when this does eventually become law.

Please get in touch with me to chat further about what these changes might mean for you or your business.