Further to our last article on IR35, the proposal to extend IR35 has been delayed until the 6th April 2021. The proposal to extend IR35 to businesses with 50 or more employees in the private sector has been described as potentially “catastrophic for the economy“.Â
Background
A full explanation of what IR35 is, is set out here and here. The Government is now looking to extend IR35 to medium and large sized businesses in the private sector, having first implemented the changes into the public sector on the 6th April 2017. However, a survey by Harvey Nash Recruitment Solutions of 500 contractors, had found that the changes in the public sector had had a disastrous impact. 80% of the respondents stated that it had had a negative impact on the public sector, 50% had noticed a reduction in the number of available contracts, and 42% said that they had had to increase their charges.
The Proposal To Extend IR35 Has Been Delayed
The decision to extend IR35 to businesses with 50 or more employees in the private sector was due to come into force on the 6th April 2020. However, given the coronavirus lockdown and the mounting criticism, the decision to extend IR35 has been delayed until the 6th April 2021.
Some estimates state that if IR35 is extended to the private sector, then it will have an adverse impact on up to 5.7 million businesses and 2 million contractors. Moreover, the Deputy Director of Policy, at the Association of Independent Professionals and the Self-Employed (IPSE), Andy Chamberlain, stated: "This is an astonishingly myopic move. The UK’s greatest competitive advantage is its flexible labour market. This proposal will dramatically restrict that flexibility and starve UK businesses of the freelance talent they need to get work done....the last thing [the country] need[s] now is heavy-handed legislation suffocating their sector. IPSE, the CBI and numerous other business bodies have already warned about the dire risks of the reforms.....The government should finally open its ears to the experts and scrap the dangerous reforms to IR35 once and for all."
Reaction To The Delay
The fact that the proposal to extend IR35 has been delayed has been broadly welcomed. However, the chief treasury secretary, Steve Barclay, stated that the delay was a "a deferral, not a cancellation, and the government remains committed to reintroducing this policy." Nevertheless, David Chaplin, the director of the Stop The Off-Payroll Tax campaign stated: "We would like to thank our 2600 campaigners for their excellent and tenacious work and we thank all the MPs who raised their concerns with the Treasury and opposed the flawed policy. We must now keep pushing for changes to outlaw the disgrace of ‘zero rights employment’ and to make it illegal for firms to push employer’s taxation onto contractors. We must also push for the genuine review of IR35 legislation promised by the previous Chancellor, as part of the Conservatives planned review into self-employment."
