Expats snared in the controversial IR35 off payroll working rules have won a reprieve as the government announces shelving the measure for a year.
The move threatened to change the way thousands of expats working as freelance contractors for their own limited companies pay tax.
Chancellor Rishi Sunak had confirmed the rules would start from April in Budget 2020.
But Steve Barclay, Chief Secretary to the Treasury told MPs in the House of Commons that the change was postponed to help businesses and contractors struggling to work through the coronavirus outbreak.
“The government is postponing the reforms to the off roll payroll working rules – IR35 – from April 2020 to 6 April 2021,” he said.
Law will be reintroduced
“This is a deferral in response to the ongoing spread of coronavirus to help businesses and individuals affected.
“This is a deferral, not a cancellation. The government remains committed to reintroducing this policy reforms to ensure that people working like employees but through their own limited company pay broadly the same tax as those employed directly.”
IR35 rules already apply to contractors working in the public sector.
They require employers to determine the working status of freelances as employed or self-employed.
If they are deemed employed, the employer must deduct income tax and national insurance from payments, if self-employed, the contractor is responsible for his or her own tax.
The latest announcement means Finance Bill 2020 will be amended to show the new start date of April 6, 2021, and fresh laws will be introduced then.
Tax experts and contractor trade bodies have branded the decision ‘sensible’.
“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned,” said Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE).
“It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.
“This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency income protection fund to keep the UK’s crucial self-employed businesses afloat.”