What does the delay to IR35’s implementation mean for businesses?

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When the government announced earlier this month that the execution of the IR35 reforms would be delayed for a year – with our nation solely focused on tackling the Covid-19 pandemic – many professionals within the business community sighed in relief.

Introduced in 2000, IR35 is an anti-tax avoidance rule that applies to all contractors and freelancers who do not fall under HMRC’s definition of being self-employed. Speaking on the 17th March, Stephen Barclay, Chief Secretary to the Treasury, addressed the House of Commons by saying:

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

This announcement goes a long way in quelling some of the concerns of contractors, and we have explored what this delay could mean for businesses too.

The Positives
More time to prepare

The news of the delay to the implementation of the stricter regulations around IR35 now gifts many businesses and private sector firms the opportunity to spend more time preparing for the reform next year, once the current global crisis abates. Indeed, this can only be a good thing for contractors; with lots of unanswered questions and concerns, this can serve as a bridge over the coming months.

Equally too, the additional 12 months to prepare for this will address an evident industry-wide lack of preparation, meaning that when this is enforced, professionals and businesses alike will be adequately prepared.

Shifting focus to the current climate
With the present economic strain on businesses being felt far and wide, the delay to IR35 will be a welcome relief at a time that is already full of uncertainty. For contractors, they can continue to focus their attention on the wider challenges that society and the business community will face as the pressures caused by Covid-19 heighten.

Importantly, pushing back the introduction of these reforms will reduce the strain for self-employed businesses, as well as any potential income loss. Contractors are having to adapt to the changing nature of work, and this will ease the uncertainty currently being experienced.

The Negatives
Getting ahead means now lagging behind

Whilst the delay means that there is now more time to prepare for the changes coming to IR35, this is not necessarily welcome news for all. Many companies will have already spent a lot of time, money and energy aligning themselves with the new regulations and now – frustratingly but unavoidably – have to revert to their current processes.

Whilst this is not immediately damaging, companies that have positioned themselves to be ahead in the market will now have to spend even more money to act again as the marketplace is like to adapt and have changed enormously by 2021.

Significant changes to staffing have already been made
It is of course important to recognise that, whilst there are positive impacts of delaying IR35, for some firms, they may have already laid off contractors and abandoned projects in anticipation of the changes.

In making essential changes and preparations, individuals and businesses are now facing the reality that they are at a disadvantage, especially within the current climate and marketplace.

Our exposure to the public sector, through existing relationships and high-profile search assignments, gives us a useful insight into the pending arrival of IR35 in the private sector and its likely impact. We have an IR35 solution ready to go and will be reviewing this closely as April 2021 comes around.
 

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