The Chief Secretary to the Treasury, Mr Steve Barclay, has confirmed that the proposed reforms to IR35, which would have impacted on a large number of contractors operating in the private sector, have been pushed back by 12 months, in the wake of the coronavirus pandemic.
The rules, which were due to become effective from 6 April 2020, were designed to address the perceived "tax leakage" as a result of contractors providing their services via limited companies (often personal services companies) in circumstances where HMRC would have otherwise assessed them to have employment status, had they been providing their services on a direct individual basis.
This is part of a broad package of financial and economic measures announced by the Government as part of their daily COBRA briefings to try and support the economy through the current crisis.
This will be a welcome development for all concerned. Many businesses (and individuals) will no doubt breathe a collective sigh of relief that they have one less thing to worry about during this uncertain period.
However, for larger businesses in particular, who may have already invested considerable time, money and effort in trying to establish whether their contractors are inside or outside IR35 (and potentially revising their models for utilizing contractor services as a result), there will no doubt be a feeling of frustration that they have been diverting precious resources on this issue in the context of the wider public health and economic crisis. No doubt questions will be asked as to why this announcement has been made now, when only last week, the Chancellor was resolute that the changes would take place this year when he delivered his Budget.
Chief treasury secretary Steve Barclay this evening announced that the IR35 tax reforms would be pushed back by one year, less than a week after the controversial measures were confirmed in the Budget.