In a move to attempt to protect the economy from the Coronavirus outbreak, Chief Treasury Secretary Steve Barclay announced that the controversial off-payroll IR35 tax reform would be pushed back one year until 6th April 2021.
The decision was announced last night among a £330bn financial package to assist the UK economy in this difficult time, which included a business rate holiday, emergency loans for companies, and financial assistance to airlines.
What is IR35?
This new tax legislation is designed to combat tax avoidance, by helping HMRC to detect ‘disguised employees’. These are workers who are supplying services via an intermediary but who would be regarded as an employee if the intermediary did not exist. In such circumstances, the individual must pay tax and national insurance contributions as if they were an employee. The new rules placed the onus of determining status on the end client.
Who will be affected by IR35?
These rules will affect all medium to large businesses, i.e. those that satisfy 2 of the following; a turnover in excess of £10 million, a balance sheet total of more than £5.1 million and/or more than 50 staff.
The news of a postponement will come as a huge relief for those companies who would have been affected by the IR35 reform, and will significantly reduce the strain and income loss for self-employed businesses. Many businesses and individuals were simply not ready for the reforms with amendments to the draft legislation still being made in February.
Businesses will now have plenty of time to prepare and successfully implement the IR35 changes when the time comes and in the meantime, the deferral gives them valuable time to focus on managing the significant effect of Coronavirus on their business.
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