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Mon June 01 2020

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Bid to stall IR35 reform fails

20 May An amendment to the Finance Bill seeking to delay the introduction of reforms to IR35 off-payroll working tax rules for the private sector has been voted down in the House of Commons.

Soon after the coronavirus crisis began, the Treasury decided to delay the introduction of the reforms by a year, from April 2020 to April 2021.

The Finance Bill, setting out budget measures, including the one-year delays to IR35 reform, were debated in the House of Commons yesterday (19th May 2020).

David Davis, Conservative MP for Haltemprice and Howden, tabled an amendment to delay the rule changes until April 2023. But ultimately the vote went through on the nod, without a division, in support of the government.

David Davis MP said: “In the light of the impact that coronavirus is having across all sectors of the economy, the government have ​rightly committed, in the motion, to postponing the planned reforms to IR35, but only until next April. The effects of the pandemic are going to be felt for considerably longer than one year. On this basis, in April next year self-employed contractors will be hit with unnecessary costs, confusion and uncertainty, just as many of them are getting back on their feet after the coronavirus has wreaked havoc across the economy. It is the self-employed and small businesses that make up the beating heart of our economy, and they will power the recovery of our economy out of this crisis.

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For the government, financial secretary to the Treasury Jesse Norman said: “To help businesses and individuals deal with the economic impacts of the coronavirus, on 17th March the government announced that the reform to the off-payroll working rules would be delayed by one year from 6th April 2020 until 6th April 2021. The amendment would delay the introduction of reform by a further two years to April 2023, but it is hard to see any genuine rationale for this further delay.”

Tax accountants expressed disappointment at the result. Reacting to the fall of David Davis’ amendment, Seb Maley, chief executive of Qdos, said: “It’s a big disappointment that IR35 reform will not be delayed, but then again it’s of no real surprise that the changes will go ahead next year. The government has buried its head in the sand when it comes to IR35, continually ignoring compelling arguments that call for a rethink of the legislation. The coronavirus crisis also means raising tax receipts has become a priority for the Treasury – even if that means contractors may be wrongly forced into ‘zero-rights employment’ as a result of the reforms.

“With less than a year until IR35 reform arrives in the private sector, businesses must continue their preparations. And companies that haven’t started yet must get to work. The changes are needless and short-sighted, but by taking a measured approach and prioritising accurate assessments, firms can continue to compliantly engage genuine contractors outside IR35. Meanwhile, the businesses that have banned contractors altogether or blanket-placed these workers inside the legislation should reconsider their stance immediately.”

Further reading: see also Understanding IR35 and Taxing times

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