As result of the coronavirus pandemic, the UK has delayed the introduction of the new IR35 regime until April 2021.
Speaking in the House of Commons, Steve Barclay, chief secretary to the Treasury, said: “This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals. This is a deferral, not a cancellation, and the government remain committed to reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly.”
At the end of February, the government had published the results of a review into the new rules which rejected calls to delay the introduction of the new IR35 rules. It did promise that it would take a “light touch” approach to penalties for a year, with fines not being issued unless “there is evidence of deliberate non-compliance”.
The government said that non-compliance with the rules is expected to “cost the Exchequer over £1.3bn a year by 2023-24 if not addressed”.
In an attempt to crack down on misuse, from 6 April 2020 employers, including charities, will be responsible for deeming whether an individual is a legitimate contractor or if they should be on payroll.
The review also reiterated its previous position that a change in circumstances as a result of the new rules will not be used to open historical enquiries, “unless there is reason to suspect fraud or criminal behaviour”.
It also confirmed that the new rules will only apply to services carried out from 6 April 2020 onwards.