Industry breathes sigh of relief as off-payroll reforms postponed for 12 months

Recruiters and industry groups breathed a collective sigh of relief following the government’s announcement yesterday evening that it is postponing the introduction of the IR35 off-payroll reforms into the private sector for 12 months in response to the coronavirus pandemic.

The controversial reforms were due to have come into effect in April, despite a concerted campaign against their introduction across the temporary, contractor and flexible labour market sector.

The announcement was made in the House of Commons yesterday evening by chief secretary to the Treasury, Steve Barclay MP, as part of the government’s promise made by the chancellor Rishi Sunak earlier in the day “to do whatever it takes to give the British people the tools to get through this challenge”.

Barclay told MPs: “This is a deferral in response to the ongoing spread of covid-19 to help businesses and individuals. This is a deferral, not a cancellation, and the government remains committed to reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly.”

Ged Mason, CEO of Morson Group also supported the move. “The Treasury’s decision to delay the introduction of IR35 reforms comes at a poignant time for UK industry and will see many businesses which rely on flexible talent and contractor populations take a sigh of relief. 

“However, this is very much a delay and not a cancellation, with the IR35 reforms in the private sector still due to come into force April 2021. This 12-month extension will ensure that organisations now have a major head start on successfully meeting the new 2021 deadline.”

Commenting on the announcement Matt Fryer, head of legal services at Brookson Group, said: “The new date will allow businesses who have yet to adequately prepare for the IR35 changes enough time to take appropriate action, with much clearer guidance from HMRC than they have had previously. Hopefully some of the businesses who have implemented knee-jerk blanket bans on contractors will also now have time to reconsider their strategy for ensuring access to flexible expertise.”

Recruitment & Employment Confederation (REC) CEO Neil Carberry said he was pleased to see the news, “though we would wish it had come in better circumstances.

“There has never been a more crucial time to maintain the stability and flexibility of the UK labour market. This change will ensure that employers have access to high-skilled contractors to manage the forthcoming fluctuations in demand, as the country navigates through the next few months.”

Welcoming the decision, FCSA CEO Julia Kermode said: “It is right to enable businesses to focus on the immediate complexities of responding to the coronavirus pandemic.” However, she noted that the rules that were introduced into the public sector still apply, and highlighted the cost to business in preparing for the private sector reforms.

“I very much hope that some detailed analysis of the wider implications of this reform can be undertaken in the coming months in order to establish whether or not it should be scrapped entirely, rather than simply ploughing on in 12 months’ time,” Kermode added.

ContractorCalculator CEO Dave Chaplin said he “warmly welcomed the announcement”. He continued: “With contractors and freelancers facing losing work with no sick pay, it was clearly the right and sensible thing to do.”
However, Chaplin said the government needed to go further, including carrying out the genuine review of IR35 legislation promised by the previous chancellor. “Over the next year, it’s time to finally overhaul the discredited IR35 legislation, which everyone knows doesn’t work and instead come up with a way to properly recognise contracting and freelancing in the tax system and ensure people are either classed as self-employed or are employees with full rights and benefits,” said Chaplin.

Samantha Hurley, operations director at the Association of Professional Staffing Companies (APSCo) said the delay will be widely welcomed by all our members and the sector as a whole.

“Now is not the time to make flexible labour more expensive or the hiring of contingent labour more difficult, when our sector is facing unprecedented times. This delay may also have the added benefit of kickstarting the hiring of remote workers who operate though a PSC from end clients who have so far, as a response to off-payroll legislation, put a blanket ban on contractors working through this model.”

Qdos CEO Seb Maley said the government “had made the right call in these unique circumstances”. 

“Given the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.” 

Andy Chamberlain, director of policy at IPSE (the Association of Independent Professionals and the Self-Employed), said the government “has done the sensible thing”. However he urged the government to do more by creating an emergency income protection fund to keep the UK’s crucial self-employed businesses afloat.

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