Off-payroll working – how thinking has changed

Although it feels like much longer, it has only been six weeks since we held our IR35 event with Jacksons Law Firm at the BIC in Sunderland. At that event we spoke to local businesses about the changes to IR35 legislation in the private sector that were anticipated to be rolled out on the 6th April. 

Shortly afterwards, the full effects of the COVID-19 crisis were being felt and the government announced that the legislation changes to off-payroll rules would be delayed until April 2021 ‘to help businesses and individuals deal with the economic impact of COVID-19.’ It was made clear that this was a delay and not a cancellation.

Most recently, the House of Lords recommended that the government reconsider broadening the scope of IR35 and instead, ‘give serious consideration to the fairer alternatives to the off-payroll working rules’. This followed an inquiry by their Economic Affairs Finance Sub-committee which was launched earlier this year.

The recommendation was based on a number of factors, including: 

• A severe underestimation of the costs to business of implementing the changes
• Insufficient analysis of the ‘unintended behavioural consequences of the proposed reforms’ and; 
• The wider potential impact on the labour market and especially the gig economy.

In its summary, the sub-committee advises that as businesses are likely to need much than a year to recover from the effects of the COVID-19 pandemic, ‘The Government should announce by October 2020 whether it will indeed implement the off-payroll rules in April 2021, or whether any on-going impact to the economy resulting from the COVID-19 pandemic will require their implementation to be delayed further.’

Certainly, from the comments we have received from our clients and from the business community in general, we would agree with the House of Lords’ findings. There is a requirement for a much more in-depth consideration of the tax system and in particular, how swathing changes to it can affect small businesses in a negative way.

A full copy of the House of Lord’s report,  ‘Off-payroll working: treating people fairly’ can be found here.

About the Author

Martin Johnson

Partner

With expertise in advising family-owned companies on a range of tax, accountancy and business issues, Martin also has an in-depth knowledge of the automotive and property sectors. In addition, he provides advice on inheritance tax planning and financial management to owner-managed businesses.  Martin leads the firm in developing its expertise in the buy-to-let sector, advising both residential and commercial property owners on relevant tax and legislation issues. A further element to Martin’s role is to build Torgersens’ relationships with banks, financial advisors and specialists in commercial and employment law to ensure that the firm’s clients have access to market-leading guidance.  

To get in touch please e-mail martin.johnson@torgersens.com.