IR35 Delay Confirmed Amid Coronavirus Outbreak

Have Questions About IR35 Delay? Contact Umbrella Supermarket

Contractors across the UK breathed a collective sigh of relief in March as the Government finally announced an IR35 delay. Despite seeming to go ahead with plans to extend the off-payroll rules to the public sector in the March Budget, the tricky lockdown situation has prompted something of a U-turn just a week later.

The delay is a welcome surprise for contractors, who have been in a state of limbo over the past few weeks. Read on to find out about the changes, the ongoing coronavirus pandemic and the affect both have had on the self-employed.

Lockdown Britain

You would have been forgiven for overlooking the first case of coronavirus in the UK at the end of January. However, since then, the virus has spread rapidly throughout the country, with over 20,000 cases by the end of March. Given that over 1,000 people have now died from the virus in the UK, it’s no surprise that the country is in lockdown until at least mid-April.

Prime Minister Boris Johnson confirmed the new measures in his daily address to the nation on 23rd March, with lockdown beginning on 24th March. While it isn’t as strict as some other countries, everyone in the country has been advised to stay at home wherever possible.

That means one hour of outdoor exercise a day, no trips out unless it’s for food or medicine and staying two metres apart from people whenever you do leave the house. However, it’s also had a profound impact on how we work…

Working during lockdown

As part of their lockdown measures, the Government has instructed people to work from home wherever possible. If remote working isn’t an option, they have advised employers to close their premises unless they fall under any of the ‘key worker’ categories:

  • NHS staff and others involved in the provision of healthcare or medical supplies
  • Teachers or others involved in essential childcare
  • Workers involved in the food supply chain – from production and processing to distribution and sale
  • Local or national government staff working on the delivery and management of coronavirus lockdown measures including benefit payments
  • Police and other security workers like border security and prison staff
  • Transport workers, keeping passenger and freight transport running
  • Staff at oil, gas, electricity and water plants
  • Public service workers, such as postal staff, journalists and those managing the deceased

Employers have been reassured that they will be covered for 80% of employee wages during any shutdown, up to £2,500 a month. That means they don’t need to make anyone redundant. Instead workers can be furloughed and return to work when the situation changes. It’s up to employers whether they cover the remaining 20% of wages themselves.

What about contractors?

The furlough scheme is great news for permanent employees as it means many of them will be able to self-isolate without a massive impact on their income. However, the system doesn’t cover the self-employed, who spent the first working week of lockdown asking what they were supposed to do over the coming weeks and months.

Should they continue working and put themselves and their families at risk of catching the virus? Or stop working and take a financial hit, applying for universal credit as their only source of income?

It seems the government got the message by Friday 27th March, announcing that self-employed would be covered by a financial aid package. HMRC would use the last three years of tax returns, or less where required, to work out the average income of self-employed workers and cover those costs for their time off work.

The only problem is that this financial aid won’t be paid out until June, meaning contractors could still face months of uncertainty and financial difficulties.

IR35 due for changes

To make things worse, all of the above was happening just weeks before changes to the controversial IR35 legislation. The IR35 off-payroll rules aim to stop people working as a self-employed contractor when they were actually doing the work of an employee.

By setting up their own intermediary in the form of a limited company, these contractors were paying less tax than PAYE and sidestepping statutory rights for their employers. Employing a contractor, companies were not liable for paying employer’s national insurance or providing things like sick pay, holiday pay or a pension scheme.

The measures were introduced for the public sector in April 2017, which saw many contractors lose their jobs with companies concerned about compliance. This was due to be extended to the private sector in 2020, affecting thousands more contractors in an instant.

Government announces IR35 delay

The UK budget on 11th March featured no mention of an IR35 delay, leaving contractors fearing for the worst. However, with the fast-moving lockdown situation, the Government has been forced into a U-turn, just a week later.

Steve Barclay, chief treasury secretary, announced that the tax reforms would be delayed by one year. Speaking in Parliament, he confirmed a new date of April 2021 for the changes, giving contractors and the businesses that work with them another 12 months to prepare.

The move is part of a package changes that aims to protect the economy from the ongoing coronavirus outbreak.

Can an umbrella help you?

The coronavirus outbreak has highlighted some clear issues for contractors in the UK. As well as relying on an IR35 delay, contractors have found themselves stuck between a rock and a hard place when it comes to sick pay.

Umbrella companies can assist with both these issues. Working through an umbrella, you’re classed as an employee, meaning IR35 simply doesn’t apply to you. You’re taxed through PAYE, but you get a range of statutory benefits in return. That includes sick pay, so you don’t need to worry about time off work to protect yourself of your family.

Want to find out more? Visit Umbrella Supermarket. Our innovative umbrella company comparison site allows you to compare quotes from leading providers in a few clicks with no obligation whatsoever.

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To help make the decision that little bit easier, in this guide Umbrella Supermarket outline the key differences between limited vs umbrella, so you can get on the right track.

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