HMRC has confirmed that the IR35 employment tax changes, which had been postponed due to the coronavirus crisis, are set to take effect from April 2021.
The rules make medium and large companies responsible for checking the status of their subcontractors. Firms must determine whether workers should be considered as an employee on pay-as-you-earn tax (PAYE) or as self-employed.
Having previously delayed the changes, which had been due to come into force in April this year, HMRC has now said it will provide support for businesses to help them understand the preparation needed. The government body has offered firms online guidance and free employment status for tax checks, and is set to bring in online webinars to show companies how the new rules will be implemented. Workshops for small groups will be delivered virtually to provide a more comprehensive overview of what the changes will mean in sector-specific terms.
The HMRC letter said: “We recognise that businesses are facing difficult challenges due to COVID-19. HMRC is providing information and support now to ensure businesses have plenty of time to prepare for the changes coming into effect in April 2021. Many contractors and organisations have already begun doing so, and any preparation now will remain valid for April 2021 when the rules change.”
Ian Anfield, managing director of payroll company Hudson Contract, said: “This announcement will go down like a lead balloon with companies and freelancers fighting for survival in a difficult trading environment with the constant imposition of new lockdown restrictions.
“Freelancers could find themselves in the worst of all possible worlds, paying employer and employee taxes but without any of the benefits of actually being employed and their clients would face losing access to a valuable resource if they refuse the terms.”