IR35 changes in the private sector being rolled out as planned

An amendment to further delay IR35 changes in the private sector has failed to secure the necessary number of votes in parliament, confirming that the planned changes to off-payroll rules will still come into force in April 2021.

The new rules – which will shift the responsibility for deciding how contractors should be taxed onto the employing businesses – were due to come into force this April. However, the rollout was pushed back to 2021so as not to add to the burden on businesses caused by the coronavirus pandemic.

Numerous business and freelance groups – many of which had opposed the changes – had hoped this year-long delay would provide an opportunity to push implementation back even further, and for a wider overhaul of the rules. However, the amendment to further delay the rollout to the tax year 2023-24 was voted down by MPs, 317 to 254.

Under IR35, if a contractor is deemed to carry out similar or the same work as a permanent staff member, their employer is required to deduct income tax and national insurance contributions as if they were an employee. The legislation was introduced to ensure workers undertaking similar roles paid the same tax regardless of whether they were an employee or contractor, and to prevent the misuse of personal service companies for tax avoidance.

The changes to IR35 in the private sector will shift the responsibility of assessing which contractors fall into this category from the individual contractor to employers. The changes have applied to public sector employers since 2017.

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