Covid-19: Lords urge IR35 reform delay

HMRC is pressed on the fairness of IR35 reform amid the Coronavirus outbreak

The outbreak of the Coronavirus means these are worrying times for the UK and the rest of the world. 

A Government recommendation that social contact should be kept to a minimum for the foreseeable future means the numbers of businesses that have already shut their offices and enforced remote working is expected to grow.

For contractors, who are already bracing themselves for the arrival of IR35 reform in the private sector on 6th April, the COVID-19 pandemic has created further uncertainty. 

In the ongoing House of Lords inquiry into IR35 reform yesterday, the Lords Select Committee focused on the Coronavirus. Lord Forsyth, who is leading the inquiry, asked a Treasury official would it not be “sensible”, given the economic circumstances, to at least delay these changes for six months or a year? 

Responding to Lords Forsyth’s question, The Treasury’s Lindsey Whyte batted away concerns, stating that the Coronavirus support package outlined in the Budget last week will be enough to minimise the impact on independent workers. Quoted in FT Adviser, she said:

“The Chancellor did also announce quite a significant package of support for public services and businesses and individuals in responding to the Coronavirus outbreak. The Government is acutely aware that this is going to be a difficult time for many people and many businesses.”

Ms Whyte then explained that contractors operating through personal service companies are entitled to statutory sick pay from their own business, which amounts to £94.25 per week. For those who are self-isolating, this will be available from the first day of sickness (rather than the fourth) and the Government will provide a refund limited to two weeks for every individual working for the company. Meanwhile, contractors who earn below the minimum amount to qualify for this (£118 weekly before tax and NI on average) will be supported by the welfare system. 

However, contractors will no doubt feel as though the Government is missing the point here. Certainly, the House of Lords Select Committee was keen to press this issue, stating that reform could be viewed as damaging, with the Government risking contractors’ livelihoods at a time when their contracts are perhaps already in jeopardy due to the Coronavirus. 

Meanwhile, HMRC official, Cerys McDonald, who is the Director of the Off-payroll Reform Programme, disagreed with the notion that IR35 changes - which the tax office has said will create fairness in the tax system - will do exactly the opposite, particularly at this moment in time. 

At the time of writing, changes to the off-payroll working rules will be enforced on 6th April, with the finance bill expected to confirm this when it’s published on 19th March. The Chancellor, who is facing increased pressure to halt potentially harmful reform, is also due to announce further details to support businesses in this challenging period. 

Qdos will continue to provide updates regarding the Government’s plans for IR35 changes and other developments affecting contractors, recruitment agencies and the businesses that engage these workers.