Lords pack extra clout as Private Sector IR35 postponed

Last Updated: 29-11-2020

Reading Time: 5 minutes

Contractors - and the industries that support them - breathed easier last night. Steve Barclay announced a 1-year postponement of the widely-condemned Private Sector IR35. Last night's statement read:

"The government is postponing the reforms to the off payroll working rules, IR35, from April 2020 to April 6, 2021.

"This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.

"This is not a cancellation and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly."

After all the heartache, is it as easy as blaming coronavirus?

ir35 u-turnBut after the Lords shredded HMRC's credibility to pieces, I wonder.

How will the Treasury will revive IR35 on April 6th, 2021?

Coronavirus took a good deal of the stage during discussions that led to this U-turn. No doubt HMRC will take little consolation in that they have the current chaos to hide their blushes.

To me, the arguments Lord Forsyth of Drumlean and the subcommittee put to the Treasury and HMRC have deeper ramifications.

Regardless of the current status, the "evidence"-based queries the Lords raised hit home.

Lord Forsyth warned that Private Sector IR35 would have a:

"very damaging effect on the incomes of many self-employed contractors."

Moreover, that contractors would:

"find themselves under very severe pressure financially as a result of [IR35] changes."

Lindsey White and her Treasury team's responses rarely offered reasoning or meaningful objectivity. The highlights of the discussion and depth of the Lords' concern you can find on FT Adviser.

Reactions from the contractor community

I think postponement's the only sensible decision. Not just for now, but the future, too. I did warn of the dangers of not reconsidering IR35 in an earlier article.

But why stop at the Private Sector? Give the NHS the ability to field the flexible workforce they need to fight COVID 19. Suspend Public Sector On-Payroll, as we'll be cleaning this mess up for many months ahead.

Of course, many other commentators have responded positively. Here's a round up of reaction:

The Govt. has "seen sense"

Qdos boss Seb Maley welcomes the postponement. He believes it now gives:

"private sector firms vital time to prepare for reform, which can only be a good thing for contractors. What matters now is that businesses use this time wisely."

Off-payroll tax doles out "rough justice"

Dave Chaplin, chief executive of ContractorCalculator said

"The Lords clearly understand that the off-payroll tax dishes out 'rough justice'.

It relies on "uncertainty to encourage firms to misclassify self-employed professionals"

This, in turn, "[destroys] perfectly good business relationships with contractors."

"Trouble is, lots of damage has already [been] done"

Andy Chamberlain, deputy director of policy at IPSE, too to Twitter:

"Glad the UK Government is being proactive"

Aberdeen South SNP member Stephen Flynn said:

"This suspension of the implementation of IR35 is a sensible measure from the government at a time of unprecedented concern for us all.

"We know that these changes would have particularly impacted workers within the oil and gas industry"

"Phew! What a welcome relief!"

Recruiter Natalie Bowers (Bowers Partnership) said:

"At a time when the contract market is all but on its knees, I can’t think of a better piece of news.

"Someone has taken a very pragmatic view here…and we have to be eternally thankful for that."

What are your thoughts? Is it too little, too late, now that big firms have a blanket ban on contractors? Are you tempted to give contracting another go, even if it means going the umbrella route?

Feel free to leave your opinion in the comments below. If you like, we'll get your comments shared in the discussion on Twitter.

Author: John Yerou

John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.

Posted by John Yerou

on March 18th, 2020 13:02pm in Contracting Matters Blog.