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Paul Scully MP Responds to Military in Business® Network

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Paul Scully Q&A

Question 7) Is there any likelihood that IR35 reforms may be delayed again, given the continued buffeting that both companies and the employment market is going through at the moment?

The off-payroll working rules (commonly known as IR35) have been in place for nearly twenty years and are designed to ensure that individuals working like employees but through their own company pay broadly the same Income Tax and National Insurance contributions (NICs) as those who are directly employed. However, non-compliance with these rules is widespread. It is estimated that this non-compliance in the private and third sectors will cost the Exchequer £1.3 billion per year by 2023/24 if not addressed, denying the taxpayer significant revenue for essential public services. It is not a new tax – the reform will improve compliance with existing rules by moving the responsibility for determining whether the off-payroll working rules apply from the individual’s company to the client engaging them.

As you are aware, the Government announced that extension of the reform to the offpayroll working rules for people contracting their services to large or medium-sized organisations outside the public sector will be delayed for one year, from 6 April 2020 until 6 April 2021. This is part of the additional support the Government is providing for businesses and individuals to deal with the economic impacts of COVID-19. This is a deferral of the introduction of the reform, not a cancellation. The Government has legislated to introduce this policy in order to address the unfairness of non-compliance with the existing off-payroll working rules.

The Government has already made the decision to delay this reform until April 2021 in response to the COVID-19 crisis. However, there is no rationale for further delay. The reform was originally announced at Budget 2018. Many businesses would have been prepared for the reform to be implemented in April 2020 as originally planned, and HMRC is undertaking a significant program of education and support to ensure that large and medium-sized organisations are ready to implement the reform. Since the delay, businesses have been putting in place preparations for April 2021, and another postponement would lead to uncertainty for businesses and potentially additional costs.

Further delaying implementation of these changes would have very significant drawbacks. As well as the fiscal cost, it would prolong the fundamental unfairness of taxing two people differently for the same work. It would also extend the disparity between the private and voluntary sectors, and the public sector, where the reform has been in place since 2017. The legislation has now been given Royal Assent, and the reform will be implemented in April 2021 as announced.

I hope these responses are useful to all those who raised questions, and I am grateful to you for your continued engagement.

Thank you again for taking the time to write.


Minister for Small Business, Consumers & Labour Markets
Minister for London

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