On 19 May, the government introduced a new ‘ways and means’ resolution, paving the way for amendment to the Finance Bill which would formally allow for the deferred introduction of the changes to the IR35 rules for large and medium-sized companies in the private sector. As noted by Economic Secretary, Steve Barclay, in the Budget debate on 17 March, the government intended to commit the 6 April 2021 date to legislation.
Alongside the resolution, the government has proposed two amendments to the Finance Bill, to be taken during the Public Bill Committee stage. New clause 1 and new Sch 1 (unlikely to be the actual numbering when inserted into the Bill) will introduce the changes by amending ITEPA 2003 Part 2 Chapters 8 and 10. Paragraphs 24 and 25 of new Sch 1 confirm that the new rules will apply from 6 April 2021.
Speaking to the resolution in the House of Commons, on behalf of the government, Jesse Norman, Financial Treasury to the Treasury, addressed a number of concerns associated with the changes to the rules:
Organisations will no longer engage with PSCs as a result of the reform. The government’s view is that, following a review of the changes in the public sector in 2017, there was no evidence of any change in demand for the skills of contractors. Before 6 April 2021, the government will commission further independent research into the long-term effects of the 2017 reforms in the public sector, and will give careful consideration to the results. Further monitoring will include new independent research six months after the private sector reforms take effect.
Organisations might take a blanket approach to status determinations, categorising all engagements as employment ‘regardless of the facts’. The government encourages businesses to ensure decisions are taken based on the actual working practices of the individuals concerned. Contractors can use the status disagreement process where they disagree with how they have been categorised.
HMRC is supporting businesses to get their status determinations right and is committing to a ‘light touch’ approach to penalties in the first year of the reforms (as already announced) and has confirmed that new compliance checks will not be opened into previous tax years unless fraud or criminal behaviour is suspected, Norman outlined in his closing remarks before the resolution was nodded through.
Alongside the government resolution, an amendment put forward (although not formally moved) by a number of MPs, proposed a further delay to the reforms to April 2023. David Davis, former Brexit Secretary, contended that in April 2021 many businesses will still be dealing with the effects of coronavirus disruption and the off-payroll rules changes will be particularly unwelcome – a point supported by Meg Hillier, Labour MP and chair of the Public Accounts Committee. Responding for the government and rejecting the proposal, Jesse Norman, said: ‘there is no need for further delay’. Extending the deferred implementation would ‘extend the disparity between the private and public sectors, and it would come at a significant fiscal cost’. Davis tweeted afterwards, ‘Labour were supporting the government anyway, so we could not win this time. Watch this space’.
Finance Bill amendments can be found on the UK Parliament website, on the Bills and legislation pages. Detailed explanatory notes to the new schedule are included in HMRC’s Finance Bill 2020 collection.
On 19 May, the government introduced a new ‘ways and means’ resolution, paving the way for amendment to the Finance Bill which would formally allow for the deferred introduction of the changes to the IR35 rules for large and medium-sized companies in the private sector. As noted by Economic Secretary, Steve Barclay, in the Budget debate on 17 March, the government intended to commit the 6 April 2021 date to legislation.
Alongside the resolution, the government has proposed two amendments to the Finance Bill, to be taken during the Public Bill Committee stage. New clause 1 and new Sch 1 (unlikely to be the actual numbering when inserted into the Bill) will introduce the changes by amending ITEPA 2003 Part 2 Chapters 8 and 10. Paragraphs 24 and 25 of new Sch 1 confirm that the new rules will apply from 6 April 2021.
Speaking to the resolution in the House of Commons, on behalf of the government, Jesse Norman, Financial Treasury to the Treasury, addressed a number of concerns associated with the changes to the rules:
Organisations will no longer engage with PSCs as a result of the reform. The government’s view is that, following a review of the changes in the public sector in 2017, there was no evidence of any change in demand for the skills of contractors. Before 6 April 2021, the government will commission further independent research into the long-term effects of the 2017 reforms in the public sector, and will give careful consideration to the results. Further monitoring will include new independent research six months after the private sector reforms take effect.
Organisations might take a blanket approach to status determinations, categorising all engagements as employment ‘regardless of the facts’. The government encourages businesses to ensure decisions are taken based on the actual working practices of the individuals concerned. Contractors can use the status disagreement process where they disagree with how they have been categorised.
HMRC is supporting businesses to get their status determinations right and is committing to a ‘light touch’ approach to penalties in the first year of the reforms (as already announced) and has confirmed that new compliance checks will not be opened into previous tax years unless fraud or criminal behaviour is suspected, Norman outlined in his closing remarks before the resolution was nodded through.
Alongside the government resolution, an amendment put forward (although not formally moved) by a number of MPs, proposed a further delay to the reforms to April 2023. David Davis, former Brexit Secretary, contended that in April 2021 many businesses will still be dealing with the effects of coronavirus disruption and the off-payroll rules changes will be particularly unwelcome – a point supported by Meg Hillier, Labour MP and chair of the Public Accounts Committee. Responding for the government and rejecting the proposal, Jesse Norman, said: ‘there is no need for further delay’. Extending the deferred implementation would ‘extend the disparity between the private and public sectors, and it would come at a significant fiscal cost’. Davis tweeted afterwards, ‘Labour were supporting the government anyway, so we could not win this time. Watch this space’.
Finance Bill amendments can be found on the UK Parliament website, on the Bills and legislation pages. Detailed explanatory notes to the new schedule are included in HMRC’s Finance Bill 2020 collection.
