Government delays implementation of IR35 off-payroll rules for private sector businesses

There was good news for the contractor industry yesterday when the government announced they would delay the controversial implementation of the private sector IR35 off-payroll tax by 12 months.

What became apparent in recent weeks was that a lot of companies were deciding to take a precautionary approach and determined all contractors were caught by IR35 and the new regulations would therefore require PAYE to be deducted from any future payments.

This blanket precautionary approach would have tipped the balance too far in the opposite direction, leading to NIC being charged when there was no need and in all probability would have caused chaos to the industry irrespective of Covid-19.

Many also discovered certain shortcomings with HMRC’s employment status tool. The options for answers to questions were somewhat limited, and as such if you had not to date had to supply and pay for an alternative worker, or fund expenditure or correct errors at your own cost, then HMRC’s tool was unlikely to find in your favour.

The 12 month deferment gives contractors a chance to learn from the experience, to review working arrangements and potentially seek viable solutions that could help to avoid an inside IR35 status determination in 12 months time.

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