office-blocks-clock

IR35 Deferral 

Caroline Harwood, Partner, Head of Share Plans and Employment Tax
18/03/2020
office-blocks-clock

The UK Government has announced some measures to help businesses but many of these were focussed on smaller entities. In this note we have set out the provisions which may assist you with dealing with your employment tax obligations in the coming weeks.

IR35 deferral

In a response to the coronavirus (COVID-19) situation the government announced late on 17 March 2020 that the reforms extending the off-payroll working rules (IR35) to the private sector will be deferred by one year until 6 April 2021.

This move will be welcomed by those businesses facing the many challenges presented by the COVID-19 pandemic. HR and finance teams will now not need to spend time in the next couple of weeks ensuring IR35 readiness but instead can deal with the more pressing matters arising from the impact of coronavirus.

However, the government confirmed that the IR35 changes will still be legislated for, meaning that they will definitely go ahead from April 2021. The only change to the draft IR35 legislation will be the commencement date for the new rules. This means that any work that you have done so far on IR35 and its impact on your business remains time well spent. 

It will be necessary for you to communicate with those consultants to whom you have already sent a status determination statement telling them what this change might mean for them and we will be very happy to assist with this.

However while the immediate pressure is off, this does mean that we should not expect the rules to be applied with a soft touch in 12 months’ time. Once the immediate issues presented by coronavirus have lessened, businesses should use the additional time to make sure that they have a robust process in place for operating the new rules and be prepared for strict adherence to the new legislation.

Finally on this point, HMRC had mobilised and trained large numbers of staff to deal with IR35 compliance. It is likely that these individuals will still be focusing on employment status for tax in the next year. The current rules already require businesses to assess the employment status for tax of individuals with whom they engage directly as freelance off-payroll workers. Therefore it may be advisable to focus on the employment status of this group of your workers over the next few months and be prepared for greater scrutiny from HMRC.

For more information, contact Caroline Harwood or your usual Crowe contact.

Contact us

Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax
London