IR35 deferred for one year

The implementation of the new off-payroll working rules (or "IR35") has been deferred until 6 April 2021 as part of the government's COVID-19 strategy. This announcement came as a shock, especially after the government confirmed less than a week ago that it would definitely still be introduced on 6 April this year.

The affected businesses fall into one of three categories: those who have already completed their business change programme, those who are in the midst of it, and those who haven't quite started yet.

Those in the latter two categories are likely to be glad of the extra time (and the breathing space to focus on the multiple urgent issues arising from the current pandemic), and all businesses will be pleased to have the pressure of an imminent compliance deadline removed.

Even those businesses who have already completed any change programmes are likely to appreciate the ability to use additional PSC contractors in the way they did in the past to plug any gaps in the workforce over the next few months on a flexible basis. They should, however, ensure that any contracts terminate or are reviewed as appropriate prior to 6 April 2021 to avoid having to undertake a second significant assessment programme in the run up to the revised implementation date.

Those who have already made and communicated status determinations to their contractors, and/or are making arrangements to end contracting relationships when these were assessed to be "deemed employment", will need to consider carefully the pros and cons of backtracking on these steps or ploughing ahead. Many contractors are likely to be keen to maintain their limited company structure whilst this continues to pose minimal tax risk to their end users, and maintaining the status quo may help preserve workforce stability at what is an extremely unsettling time. However, end users will need to think carefully about any other issues this may throw up - in particular the risk of claims based on employment or worker status, which may be heightened in the current climate. This may be particularly relevant where contractors have either received formal status determinations or have been told that the business considers they would be treated as deemed employees for tax purposes.

Businesses will also need to ensure that their (in many cases very significant) investment of time and cost into preparations for this change is not wasted and all of the hard work that has been done so far is used to ensure preparations in advance of the new deadline are as smooth and painless as possible.

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