IR35 off-payroll reforms postponed for 12 months

Prior to the coronavirus pandemic, there were concerns about the impact of the Government's IR35 reforms on contractors.  There have been claims that some public sector bodies were moving contractors over to PAYE as a matter of default, unless the contractor could prove to a high standard that the off-payroll reforms could not apply.  This has given rise to indications that contractors were moving away from the public sector.  

The IR35 reforms were due to move across to medium and large businesses in the private sector from April 2020.  Many contractors were worried about the impact on their businesses and pricing models.  Advisers had also raised concerns that the proposed reforms were not fully thought out and relied too heavily on HMRC guidance and assurances that a light touch would be taken.  

Over the coming months, HMRC will have their hands full coping with the impact of the coronavirus.  They have clearly recognised that this is not a time in which to introduce measures that will have a negative impact on a significant sector of business.  

It has, therefore, been announced today that the IR35 reforms to the private sector will be deferred for 12 months to April 2021.  

There is, however, a question as to whether this is going far enough.  As noted above, it appears that some contractors have been moving out of public sector work rather than accept payment under PAYE.  Given that the public sector, in particular the NHS, is predicted to be desperate for resources in dealing with the coronavirus, the deferral is unlikely to help the people who need it most.