Government has announced a last-minute postponement to the implementation of the Off-Payroll Tax to the private sector in light of the recent Covid-19 outbreak, with the legislation now due to be reintroduced in April 2021.
The decision was taken following significant pressure from contractors and campaigners - and indeed from within the House of Lords - who warned that the inevitable loss of work due to the virus for contractors deemed ‘inside IR35’ and effectively forced into ‘zero rights employment’ would prove catastrophic.
“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals,” announced Chief Secretary to the Treasury, Steve Barclay MP to the House of Commons.
“This is a deferral and not a cancellation, and the Government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same amount of tax as those employed directly.”
Reaction: Delay presents opportunity to overhaul Off-Payroll
Though Government has stated its intentions to legislate next year, contractors, clients and industry stakeholders will no doubt welcome the valuable time granted by the tragic circumstances. The announcement presents significant scope for greater consideration of the ill-considered measures, and further discussion over the alignment of employment status for tax and employment rights purposes, to combat the issue of ‘zero rights employment’ that Off-Payroll threatens to escalate.
“We warmly welcome the announcement that the Government has seen sense and delayed the damaging IR35 Off-Payroll Tax roll-out for a year,” says ContractorCalculator CEO Dave Chaplin. “With contractors facing the prospect of losing work with no sick pay, it was clearly the right and sensible thing to do.We thank our 2,600 campaigners for their excellent work, and we thank all the MPs who raised their concerns with the Treasury and opposed the flawed policy.
“We now must keep pushing for changes to outlaw the disgrace that is ‘zero rights employment’, and to make it illegal for firms to push employer’s taxation onto contractors. We also must push for the genuine review of IR35 legislation promised by the previous Chancellor, as part of the Conservatives’ planned review into self-employment.”
Chaplin adds: “Over the next year, it’s time to finally overhaul the discredited IR35 legislation, which everyone knows doesn’t work. Instead we must come up with a way to properly recognise contracting and freelancing in the tax system and ensure people are either classed as self-employed or as employees with full rights and benefits”.