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News from 24 Seven London: IR35 Legislation Postponed

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In recent months we have been reaching out to candidates and clients about how to best deal with the impending IR35 legislation coming into place in April 2020. For many it has been quite a confusing and worrying time. Unfortunately for many freelancers it is still a difficult time, with COVID19 we are now being asked to stay at home and distance ourselves from others making it hard for some freelancers to find work.However, there is some light at the end of the tunnel, the UK government has made the decision to postpone the IR35 legislation until April 2021 to help freelancers and companies in this uncertain period.  This means that contractors will continue to decide their IR35 status for another 12 months when working in the private sector.After it had been confirmed in the Budget that changes to the off-payroll working rules would be introduced on 6th April 2020 as planned, contractors had all but given up hope of a last-minute rethink. However, as a result of the Coronavirus outbreak and as one of the Chancellor’s many measures to protect businesses it has been decided to defer the IR35 legislation for a year.Currently, the responsibility for IR35 determination sits with the candidate - meaning freelancers that have set up their own LTD companies reap the benefits of paying less tax than if they were using an Umbrella company. The change that was due to come in April would mean that the client would determine if the freelancer was Inside or Outside of IR35 and therefore the tax burden would fall on the client if they made the incorrect determination.This meant most roles were being deemed as Inside IR35 which of course was not good news for freelancers as this saw their take home salary reduced.

So what does this change mean?

  • The liability will continue to lie with the contractor as before, however, if contractors have been assessed as inside we need to be careful. If the role was assessed as inside, then it is still inside.

  • Remember that IR35 is not cancelled but deferred for a year

  • Use this year to prepare yourself financially for when IR35 does come into effect,

For the most part, this will mean contractors can continue to use their LTD companies and not take the hit on their take home salaries this year - although it's a pretty unnerving time hopefully this news offers a small glimmer of hope for some individuals.