National lockdown due to covid-19 restores hopes of IR35 reform delay

A second national lockdown due to coronavirus has restored the prospect of private sector IR35 reform being delayed by a year and introduced in April 2022 instead.

Although it has become a firmer prospect since Saturday, it was raised in June when an IR35 advisory said covid-19 worsening was the only way that the 2021 launch would not go ahead.

Since then, the government has promised businesses and individuals that they will “not need to implement and adjust to the reform while dealing with the economic impact of covid-19.”

'Right now, anything could happen'

Clarification on Saturday that a covid-19 vaccine will not be ready until Q1 2021 indicates that the government will be breaking its word if it does stick to the reform’s start date of April 6th 2021.

“An off-payroll rules’ U-turn would be surprising but with the dreadful state of the economy and quite frightening growth of the virus, anything could happen,” a tax expert told ContractorUK.

“And I say ‘anything could happen’ aware that the off-payroll rules are set in law, but also aware that the pandemic was the very reason why the reform was delayed in the first place.”

'This time around it's different'

In June, the IR35 advisory which said a higher infection rate could lead to a reform-delay, Bauer & Cottrell, pointed out how quickly legislation related to covid-19 can be passed.

Tomorrow for example, the government looks set to introduce legislation to implement the four-week national lockdown, despite announcing the framework a mere four days ago.

But ReLegal Consulting, a status advisory, suggests contractors shouldn’t get their hopes up.

“Now it’s different,” says the advisory’s Rebecca Seeley Harris, referring to coronavirus being seen by the government back in March as a justifiable reason to postpone the reforms.

“Organisations have had more time to prepare and some have already made their decisions with regards to working, or not, with PSCs. 

“So I don’t think the government is likely to delay the legislation any further. I think the first time round we were very much in the unknown, in terms of the pandemic and the government didn’t really have any choice but to delay it.”

'Would make sense for an IR35 rethink'

Yesterday Seb Maley, an IR35 contract reviewer, said the government had considered PSCs but had simply chosen not to help them, implying he too sees a reform-delay as unlikely.

“It’s a deliberate, short-sighted and callous move to ignore these individuals simply because they work via their own limited companies,” he said, referring to newly beefed-up help for sole traders.

Asked specifically if workplaces being locked down for a whole month increases the likelihood of the government delaying the off-payroll reforms (it is such end-users who will have to decide their contractors’ IR35 status), the Qdos boss said he wasn’t convinced.

“I don’t necessarily share the view that another lockdown increases the chances of another deferral to IR35 reform.

“While many things are up in the air at the moment and it would make sense for the government to pause and rethink with regards to April’s changes, as far as Westminster is concerned, IR35 reform will raise revenue for the Treasury.

Mr Maley continued: “With this in mind, I’d be very surprised if the changes were delayed again. Businesses certainly shouldn’t pin their hopes on another last-minute deferral either, and instead must continue preparing for the arrival of reform this coming April.”

'Inequality'

His comments come after the government extended the Coronavirus Job Retention Scheme, under which eligible limited company contractors can claim 80% of their salary.

But on top of the uncertainty of IR35 reform hanging over them, such PSC workers remain ineligible under the scheme for reimbursement of their dividends.

“An individual who has chosen not to incorporate, may now be entitled to far more support than another who has, even if both businesses are significantly impacted [by covid],” says Chris James of JSA Accounting, alluding to SEISS grants being increased yesterday from 40% to 80% of average monthly profits.

Also the chair of the Freelancer & Contractor Services Association, Mr James added: “This inequality has still not been properly explained by the government.” 

'Sudden change of heart unlikely'

At the time of writing, a petition calling Number 10 to postpone the off-payroll reforms until the pandemic is “resolved” has attracted 9,948 supporters -- just 52 signatures shy of the threshold requiring the government to issue a formal response.

But one limited company owner doesn’t believe the petition will succeed in securing a deferral, saying last night: “If the government hasn’t listened to the evidence of the damage that this [private sector IR35 reform] might do to the economy thus far, I don’t think they will suddenly have a change of heart.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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