Government delays IR35 for a year in face of COVID-19 crisis

The IR35 tax reforms will be delayed for a year to help firms weather the coronavirus pandemic, the treasury has revealed.

The move, announced by Chief Secretary to the Treasury Stephen Barclay, comes less than a week after the measures were confirmed in the Budget and a day after the House of Lords Finance Bill sub-committee called for a six- to 12-month delay to IR35 in light of the impact of the COVID-19 pandemic.

Speaking during the Budget debate in the Commons yesterday (17 March), Barclay said: “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 people working like employees but through their own limited company pay broadly the same tax as those employed directly.”

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The move is part of a package of measures the Treasury has announced to protect the economy from the coronavirus outbreak.

Under IR35, large and medium-sized haulage companies with net turnover of above £10m or 50 or more staff will not be able to take on drivers that work as limited companies.

Instead drivers will need to be employed as a PAYE worker - either by the haulage company or the driver agency or through an umbrella company.

The deferment gives those opposed to IR35 another year to lobby against the reforms which are particularly unpopular with self-employed HGV drivers and driver agencies who warn it will exacerbate the driver shortage crisis and add another 20% to the cost of hiring agency drivers.