Despite facing strong opposition, the controversial reform to off-payroll working rules will go ahead as planned in 2021.
The changes to IR35 will see all medium and large private sector businesses in the UK become responsible for setting the tax status of all contract workers they engage with.
It had been expected that the amendment to the Finance Bill, that was put forward by Conservative MP David Davis and Liberal Democrat MP Ed Davies, would be postponed until 2023-24. However, the motion was defeated on July 1st, despite strong backing from many MPs and contractors alike.
Speaking of the reform, Richard Hepburn, Operations Manager at Gorilla Accounting, feels that contractors and freelancers around the UK need to prepare for the changes as early as possible.
He said: “Whilst the news isn’t ideal for contractors, there is still plenty of time to get prepared for the changes that lie ahead with the deadline of April 2021.
“We would have all much preferred this reform to be pushed back to 2023/24, but the reality is that contractors and businesses alike need to begin planning immediately for when the changes come into effect next year.
“With a bit of forward planning and guidance from experts for both contractors and medium and large sized firms, we feel that the impact can be minimised and managed relatively well.”
IR35 was introduced back in 2000 to combat tax avoidance from freelance and contract workers. The rule now applies to all contract workers who do not fall under HM Revenue & Customs definition of being ‘self-employed’.
At present, off-payroll rules only apply to freelancers working in the public sector, but HM Treasury has consistently stated it was necessary to change this to address the “fundamental unfairness” surrounding non-compliance.
Commenting on the decision, ContractorCalculator CEO, Dave Chaplin, who has been spearheading the lobbying effort against the reform, said: “For Government to bulldoze ahead with this damaging legislation at a time of national crisis is beggar’s belief. Government should be supporting businesses right now, not hampering them and, in turn, inflicting harm on the entire UK economy.
“We will continue to campaign on behalf of the UK’s contractors and freelancers to prevent the legislation entering statute in its current form. We do now, however, need thousands of contractors to engage with their MPs to turn this around.”
