IR35 private sector reforms will go ahead in 2021
The fight to delay the roll-out date for IR35 private sector reforms was lost at the third reading of the Finance Bill, causing fear over how the changes will affect contractors and flexible workers.
The Finance Bill 2019-2021 has been working its way through the House of Commons since March 2020. A late-stage amendment saw MPs back a motion for the April 2021 start-date for the reforms to be delayed until the 2023-2024 tax year – the intention being that the delay would allow the Treasury more time to assess the likely impact on contractors and businesses using them.
MPs were asked to vote on a series of amendments in addition to this one, but the IR35 amendment received insufficient support, meaning the changes will rollout as planned on 6 April 2021.
As a result, from 6 April 2021, medium-to-large private sector companies will be responsible for determining how the contractors they engage should be taxed.
Currently, contractors are responsible for deciding whether they should be taxed in the same way as salaried employees or as off-payroll workers. The government has raised concerns over this system of self-declaration, claiming that some contractors deliberately misclassify themselves as working outside IR35 to minimise their employment tax liabilities. Hence the changes going ahead on 6 April 2021.
With this start date now a certainty, business leaders are being urged to waste no time in preparing for the reforms, albeit with some concerns over the impact on the economy.
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