IR35 in the private sector- why 2021 should not be the year of implementation

Last year as the country entered its first national lockdown, the Chancellor made the sensible decision to delay the IR35 reforms in the private sector. This decision was welcomed by the REC and several other leading business bodies. However, as we approach the new implementation date (6 April), there is an even bigger argument to be made for delaying the reforms once again.

The Coronavirus pandemic has had an enormous impact on the labour market. From the outset, when lockdown was introduced, there was an immediate pause on the jobs market.  Hiring - particularly permanent but also temporary work - rapidly slowed down and business confidence in the UK economy plummeted. REC data during that period found that people placed into temporary roles fell 40% compared to the same time last year.

Although the UK labour market has since shown incredible resilience - particularly with temp roles, this resilience should not be taken for granted. After almost a year of battling tough trading conditions, many businesses are in a much more vulnerable position now than when the delay was introduced last year. Introducing major tax reforms this year is a gamble the REC believes the labour market and wider economy cannot afford to take.

Calls for a delay have also been supported by the House of Lords Economic Affairs Finance Bill Sub-Committee. In their April 2020  report Off-payroll working: treating people fairly, the committee argued that further changes to the rules in the private sector “will cause widespread disruption”.

The REC has been urging Government to delay the IR35 reforms in the private sector for another year. Delaying the reforms would grant Government time to regulate umbrella companies and also consider alternatives to the off-payroll rules which do not treat people as employees for tax purposes when they do not enjoy the rights of employees.

While speculation is growing that an IR35 delay may be announced in the Spring Budget on 3 March, the REC is advising members to err on the side of caution and be prepared for the reforms. The financial and reputational risk of not being compliant in April is too high of a risk for agencies to take.

REC members who supply self-employed agency workers can access our IR35 hub to find:

• The latest IR35 advice from HMRC and the REC legal team
• New template contracts to reflect upcoming changes to the IR35 rules.
• Legal guides and factsheets
• Business advice from IR35 experts and REC’s specialist business partners

 In addition, REC members, have access to:

• REC's legal helpline (Mon - Fri)
• Specialist REC's business partners for further legal support.

The REC is also holding virtual seminars to provide practical support and step by step guidance on how to be fully compliant with the new rules