Changes to the off-payroll working rules (IR35) due in April 2020 will now be postponed to 6th April 2021

Late on 17th March 2020, the UK Government announced that the IR35 off-payroll working reforms, which were due to come into place on 6th April 2020 (and would have brought all medium and large private sector companies into the same regime as public sector organisations), are now being delayed for a period of 12 months until April 2021.

HMRC have stated the following:

This is part of additional support for businesses and individuals to deal with the economic impacts of Covid-19. This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.

This announcement is a deferral of the introduction of the reforms, not a cancellation. The Government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly.

What this means, in the immediate term, is that medium and large private sector companies, that previously needed to issue an IR35 Status Determination Statement (SDS) for any Personal Service Company (PSC) contractor that would be supplying services to them beyond 6th April 2020, no longer need to provide such SDS. Also, that any SDS previously issued is effectively null and void, as it is no longer required by law.

The Adecco Group UK&I welcomes this development, at a time when it is clear that small businesses, the self-employed and freelancers are likely to experience a significant adverse economic impact as a result of the COVID-19 outbreak. This also allows our clients to continue to have all options on the table to engage with flexible workers, at a time when this is most needed.

In anticipation of the changes that were previously scheduled for this April, we are aware that there are a number of companies that adopted a strict policy which prohibited the supply of PSC contractors. At the Adecco Group UK&I, we strongly recommend that such businesses re-think and reverse any ‘no PSC’ or ‘no limited company contractor’ positions. It has never been more important for businesses to have as flexible a workforce as possible; and, until April 2021, IR35 tax determination and liability will remain with the limited company worker for all supply to private sector clients. Until April 2021, there is simply no reason whatsoever for companies not to continue to use the skills of workers who choose to provide their services via their PSCs. There will be a real risk that any end users refusing to accept PSC contractors will struggle to engage and retain the very best talent on the market.

If any of our clients have any queries about the impact of this development, please do not hesitate to contact your account manager.

gavin tagg

Author: Gavin Tagg
General Counsel