IR35 reforms postponed in Covid-19 relief package

The government has postponed controversial tax reforms to the IR35 off-payroll working rules for the private sector for a year, until 6 April 2021, as one among a series of measures designed to help ease the strain that the coronavirus pandemic is putting on businesses and individuals.

Many agency drivers work off-payroll, invoicing their services through a limited company they set up for the purpose. They then save tax by drawing most of their remuneration as a dividend rather than a salary.

The new measures would have required drivers and employers to demonstrate that claimed self-employment was genuine – for example, through the driver holding their own operator licence or owning a vehicle – with significant penalties available to enforcers for those found wanting.

The decision to postpone the reform was announced alongside an unprecedented emergency £330bn financial package to bolster the UK economy, which includes a business rates holiday and loans for struggling companies.

Chief secretary to the Treasury Steve Barclay said: “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.”

Earlier this year, driver recruitment specialist Driver Require said that the shift from agency drivers operating as limited company contractors to PAYE arrangements would effectively raise agency labour costs by as much as 25 per cent, in order to maintain the drivers’ net pay and cover agency margins, tax and national insurance.

The impact on the end client, it said, would be a rise in temporary driver costs of around 20 per cent. A range of other temporary government measures designed to help business during the Covid-19 crisis include a job retention scheme to safeguard against redundancies, which will see HM Revenue & Customs reimburse 80 per cent of the wages of ‘furloughed’ employees (those asked to stop working but kept on the payroll).

Meanwhile, a self-employment income support scheme will allow self-employed workers who have lost income due to Covid-19 to claim a taxable grant of 80 per cent of their trading profits, within limits; and small and medium businesses will be able to reclaim statutory sick pay for absences owing to the disease.

VAT payment deferrals have also been introduced, as has an extended deadline for income tax self-assessment. Commercial tenants who cannot pay rent due to Covid-19 will also be protected from eviction due to missed payments.

In late March, the Road Haulage Association’s chief executive Richard Burnett called for further financial measures to help hauliers whose businesses had seen a drop in volume and were at risk of closure – among them the deferment of clean air zone charges and the London Direct Vision Standard, M6 toll relaxations, and fuel duty reductions.

“We are actively exploring options with ministers including immediate cashflow injections, enforced payment holidays with leasing companies, banks and fuel suppliers and further measures to protect employees’ wages to safeguard our critical driver workforce both now and for when volume increases,” he said.

Full details on the various government relief schemes being made available for business, and the latest information and guidance, is available at: gov.uk/coronavirus