Sponsored content b y Andrew Mitchell, Partner, Armstrong Watson Skipton

IN an unexpected but welcome move, the extension of the off-payroll working rules to the private sector has been postponed for 12 months as part of the government’s emergency response to the coronavirus outbreak.

The off-payroll working rules known as IR35 are designed to prevent the avoidance of tax and national insurance by a contractor providing their services through a personal service company rather than being employed directly.

These rules require the engager to determine that tax status of a contract and decide whether or not it is in effect disguised employment.

If it is disguised employment then any payment under the contract must be made under deduction of PAYE and national insurance.

The rules were applied to the public sector in 2017 and were due to be extended to the private sector from April 6 this year.

This was confirmed in the Budget on March 11 but just one week later these changes have been delayed by one year.

A reflection of just how much has happened in a very short period of time.

It has been recognised by the Government that the reforms would be a significant change for both businesses and contractors.

Many risked losing work with no sick pay.

However, it has been emphasised that this is a ‘deferral and not a cancellation’. The Government remains committed to reintroducing the policy on April 6, 2021.

The delay will allow businesses and contractors more time to prepare for the changes next year.

Unfortunately this announcement may be too late for some as businesses may already have laid off contractors in anticipation of the changes.

Following this announcement it raises the question whether some of the other tax changes due to take effect next month should be delayed.

These include measures limiting private residence relief and the new 30 day capital gains tax reporting and payment rules which I have commented on recently.

Whether the Government is prepared to go that far we will have to wait and see.

These are extraordinary times.

l If you’d like more information about our tax planning services, get in touch by calling 01756 620021 or email andrew.mitchell@armstrongwatson.co.uk