Skip to main content

News story

March 26, 2020

COVID-19: IR35 delayed to 6 April 2021

Owing to the spread of the Coronavirus (COVID-19), the Government have opted to delay the controversial IR35 tax reforms, which were due to come into force on 6 April 2020, by one year.

The Government have stressed that this is not a cancellation of the policy but a deferral only. Whilst this decision removes the immediate pressure, employers and individuals should continue to prepare for the IR35 changes, which will come into force on 6 April 2021.

What are the IR35 – off-payroll working rules?

IR35 is a piece of tax legislation that permits HMRC to collect additional payments where a contractor is an employee in all but name.

It applies where a worker provides services through their limited company or another type of intermediary to the client. An intermediary is usually the worker’s own company, but it could also be a partnership, a personal service company or an individual. Provision is made that workers, who would have been an employee if the services were provided directly to the client, pay the same tax and National Insurance Contributions (NIC) as employees.

What are the IR35 reforms?

Currently, individual contractors in the private sector can determine their employment status for tax purposes and, as such, decide whether IR35 applies to them.

Following the IR35 reforms, if your business is a medium or large size business, this contractor self-assessment will cease and will instead be the responsibility of the client or hirer (the “end-user”) to determine whether IR35 applies.

Clearly, the Government is concerned with non-compliance under the existing self-assessment regime, but these reforms will significantly impact medium and large-size organisations.

The IR35 definition of medium and large-sized organisations is based on the definition found in the Companies Act 2006, whereby two or more of the following criteria must be present:

  • a turnover of more than £10.2m
  • a balance sheet total of more than £5.1m
  • 50 employees or more

Whilst there is an exemption for smaller businesses in the private sector, there is no such exemption for businesses operating in the public sector.

Impact of the reforms on the end-user

If the end-user determines IR35 will apply to the contractor, then the end-user is responsible for paying the required PAYE and NIC, including Employers NIC and Tax.

Impact of the delay on the end-user

Clients receiving contractors’ services must ensure they’re ready for the IR35 reforms next year. The delay will give end-users if they haven’t already, enough time to prepare and review their existing business model and its future needs.

Whilst the Government had agreed to waive non-compliance fines for the first year, this was based on the original launch date of 6 April 2020. Given the delay, the fines are likely to be strictly enforced in circumstances where businesses now have an additional year to prepare.

Businesses that get it wrong face significant liability for unpaid taxes.

Speak to Karen Cole, who can assist your business in reviewing existing contracts and practices and advise on suitable steps to protect your business.

Note: This is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • Capacity and client care: Supporting older and vulnerable clients with expertise and empathy
    Capacity is a complex yet essential area of private client law. Supporting older and vulnerable individuals requires a combination of legal expertise, emotional intelligence, and ethical diligence to protect their rights, dignity, and autonomy.


    Read more
  • Neuroinclusion in the workplace
    With a varied workforce, businesses in the UK need to provide inclusive policies and practices. One key area that employers must address is neuroinclusion.


    Read more
  • RIAA Barker Gillette (UK) appoints Brinda Granthrai as Partner and Head of Commercial Real Estate
    London, May 2025


    Read more
  • Strategic lifetime gifting
    How to minimise your IHT liability during your lifetime.


    Read more
  • Navigating directors’ duties
    Legal responsibilities and risks for UK company directors


    Read more

What they say...

  • J. M., May 2025
    “Just wanted to give a massive shout out to Herman. He has supported myself and also my parents with writing up wills and with some inheritance tax advice as well. Everything was made really clear very professional, ethical and boundaried. Herm

  • Michael P, May 2025
    “Recently had occasion to use the services of Borehamwood branch conveyancing department and very impressed with all the contacts we had there, namely Laura Thurlow and Anne Stern.”

  • Michael, May 2025
    “Very pleased with the services provided by Charlotte Barbaroussis. Particularly found her quick and effective to reply to any queries.”

  • Malcolm & Sheila Blackmore, May 2025
    “My wife and I engaged RIAA Barker Gillette to prepare our wills and LPOA’s. James McMullan and Charlotte Barbaroussis were the epitome of professionalism – responding quickly, talking us through the legalese, clearly answering any

  • Ian, April 2025
    “Martin and his team at Barker Gillette acted for us in our purchase and sale of property. The chain was lengthy and elements of the work became complex. Martin was tenacious and resolved to answer our queries as they arose. He handled all aspe

Read more
Send this to a friend