An update on IR35 for the private sector

April 15, 2020 / News & General

IR35 postponed but not cancelled

The government has decided to postpone the new IR35 reforms which were due to roll out in the private sector this month. The controversial tax reforms, which are already applicable to the public sector, have been postponed in light of the coronavirus outbreak which has already put a huge strain on businesses and workers.

Speaking in Parliament, Chief Secretary to the Treasury Steve Barclay said: 

“The government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021…in response to the ongoing spread of COVID-19 to help businesses and individuals.

“This is a deferral, 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 tax as those employed directly.”

Many will be disappointed that the new IR35 rules haven’t been cancelled altogether. However, HMRC are unlikely to be prepared to have one set of rules for the public sector and another for the private sector.

So, what will the new rules mean for the private sector in April 2021?

The new IR35 rules in April 2021

The proposed changes would mean medium and large companies will be responsible for assessing their contractors’ IR35 status. (Currently the responsibility is with the individual contractors.)

IR35 has been covered in controversy since the government planned to change the rules for both the public and private sector – with criticism around the negative effects the changes could have on both businesses and freelance workers. 

Since the changes in the IR35 rules, a lot of contractors have closed down their solvent companies with a Members’ Voluntary Liquidation (MVL) and become a PAYE employee. 

It is important to stress that if you are inside IR35 you should not use this delay as a way of remaining outside IR35.

HMRC have been criticised for not doing enough to prepare private sector companies for the upcoming change, despite their promises. The Treasury recently undertook a review of off-payroll working rules, but had said that it will still go ahead – before Coronavirus changed things.

Some changes have been proposed to help smooth the transition: 

  • During the first year of the rollout, HMRC will not place penalties on anyone with inaccuracies relating to their off-payroll working rules. Those who deliberately fail to comply can still be charged.
  • Clients will now be legally obligated to supply information and must respond to requests of information about their size from agencies or workers. This is because IR35 will mainly affect medium and large companies with at least 50 employees.

These are likely to still apply when the changes do come in but, with all the uncertainties around the COVID-19 situation, there are no guarantee that the IR35 changes will come in next year. However, they are very likely to come in at some point.

For more information

We have answered some commonly asked questions surrounding the IR35 private sector reforms

If you are unsure about how IR35 will affect you, we would recommend that you speak to your Accountant.

And, if you do want to close your company down with the MVL process, contact us on 0161 907 4044, or