On 17 March, Chief Secretary to the Treasury, Steve Barclay, announced that the extension of the more rigorous compliance regime for the IR35 rules to the private sector will now be delayed until 6 April 2021. This announcement comes less than a week after Chancellor Rishi Sunak confirmed in his Budget that the new regime would apply to the private sector from 6 April 2020.
The IR35 rules are aimed at contractors for companies who are, in reality, providing the same service as employees. The effect of these new anti-avoidance rules, that will now apply from 6 April 2021, is to force companies to deduct tax and National Insurance at source for contractors in the same way as they do for employees.
At the moment such contractors working in the private sector self-assess their earnings when they complete their Tax Returns each year.
The extension of the more rigorous IR35 regime to the private sector makes it more difficult for a contractor to offer contracting services through their own company. Claiming to be self-employed rather than employed will be more difficult as well.
These new rules have only been paused and will still come into force on 6 April 2021. However, the delay is welcomed as it allows contractors and companies more time to prepare for the impact of the tightening of the IR35 rules.