Employment experts have warned us that any hopes that the IR35 reforms will be delayed for a second time are very unlikely.

In March this year, the government announced that the planned changes to the way IR35 works in the private sector, would be delayed for one year. The legislation had been due to take effect from 6 April 2020 but it will no take affect from April 2021.

Despite huge opposition, and an attempt by MPs David Davis and Ed Davey to delay the reform by two years was defeated as MPs voted against the changes by a majority of 321 to 232.

In April, the House of Lords economic affairs finance sub-committee suggested that the government should have waited until October to announce that the reforms would be brought in when the impact of Covid-19 on business may be clearer.

In response, HMRC and the Treasury said “At the time of the delay, many businesses would have been prepared for this change to take place. It is vital, in the current conditions, that businesses have clarity over the timing of the implementation of the reform, and the final legislation, so they can prepare in a timely fashion. Waiting until October to confirm whether it will be implemented would create uncertainty.”

So how is IR35 changing?

From April 2021, status will be determined by the client not the contractor. If the client determines that IR35 should apply to the engagement, payment to the contractor will be taxed at source as if they were an employee.

Are there any exemptions to the new IR35 rules?

If you engage directly with a small business depending on certain criteria the new rules could be exempt: –

A client is small if they meet two of the following three:

·         No more than 50 employees

·         No more than £10.2m turnover

·         No more than £5.1m on the balance sheet

HMRC will continue to enforce the ‘old rules’ where the client is small, so you will still need to consider the IR35 status of your assignment.