There was a statement in Parliament on 18 March 2020 by the Treasury secretary Steve Barclay to confirm that IR35 reform will not be introduced next month, but will be delayed for one year due to the economic impact of the coronavirus.
This is a temporary reprieve for affected businesses and to reinforce that point and the ‘message’ of IR35, Steve Barclay announced: “This is a deferral, not a cancellation and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly.”
What happens now?
If you have already had a Status Determination Statement this should be null and void. You should contact your current client and ask what action they are going to take. But of course with all of these things, it raises questions such as, will those large business, such as the Banks, overturn their decision not to engage Personal Service Companies (PSC) in the future for another twelve months? Or if you have already signed an agreement with an Umbrella company, will they allow you to walk away from it?
If you signed up and were on a payroll before 28 February 2020, you should now see yourself in a furloughing scenario that will work based upon your agreed salary which is likely to be a lot more than in your own Company if you were paying dividends. You might wish to continue this arrangement for the additional money the Government will give you. If you continue for the final year within your own Company, your furloughing claim will be determined on your own payroll cost which is likely to be less than the personal allowance. We are involved in asking representations to try and get some of the dividend recognised, but cannot guarantee success on this and so it’s a low reward till the COVID-19 lockdown ceases.
This very late change in policy is due to the many questions being asked about how the self-employed, those on zero hour contracts and contractors, are going to survive as less work is available due to the virus. Whereas home working for PSC contractors would often be normal practice, the risks of contracting would also mean no work no pay from your client.
At least we all have twelve months to better prepare, perhaps now knowing the likely outcomes when the rules do change. That is if anything at all can be predicted in these times where things move so very quickly.
If you need assistance please contact Duncan Forsyth on 01376 326266 or email firstname.lastname@example.org
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.