The Government has delayed its controversial IR35 private sector reform by one year, until April 2021, because of the COVID-19 pandemic.
This will mean that contractors will continue to decide their own IR35 status for the forthcoming 12 months when working in the private sector.
It is important to remember that this decision is a deferral, not a cancellation and the Government remains committed to reintroducing the reform to ensure contractors who are working like employees, but through their own limited company, pay the same tax as those who are employed directly.
Companies must take advantage of this second chance to be fully prepared
Private sector companies are urged to take this opportunity to continue their preparations so that status determinations are handled thoroughly and properly co ensure the welfare of their contractors.
Businesses should take this second chance to be fully prepared, as the recently announced soft approach by the HMRC in the first year, will likely not be repeated come 2021.
What does this mean for contractors?
The move is a welcome reprieve for contractors, who retain their control over their own status decision, but it is important to stress the need for diligence and common sense in light of this decision.
Contractors who were “waiting to see what happens” in regards to IR35 would be wise to take this opportunity to have their current contracts reviewed for IR35 compliance and ensure they have the correct insurance protection in place in case of a tax investigation being made against them.
Contractors must ensure they are covered
The COVID-19 pandemic has undoubtedly had a huge impact on business operations and freelancers and contractors will be hit very hard as the level of work opportunities will not be the same in the coming weeks.
It is important not to become complacent because of the situation. Comprehensive business insurance should still be retained as claims and tax investigations are unlikely to be halted in the same way that business operations have been.
To ensure full coverage and peace of mind, retaining and/or renewing your business insurance policies, such as: professional indemnity insurance and tax enquiry & legal expenses insurance is important. Contact your insurance provider to discuss your options.
To contact Caunce O’Hara please call 0333 321 1403
The Government is expected to publish further information regarding the IR35 reform and announce new measures to support businesses in crisis.