The Treasury has said it “remains committed” to changes to contractor pay rules by April, despite a delayed budget and the upcoming general election.
Last month chancellor Sajid Javid confirmed the budget would not be delivered this Thursday as planned which, coupled with news of a December election, has brought speculation that IR35 rules set out in the draft Finance Bill could be delayed.
IR35 – changes to off-payroll working rules for contractors – is expected to come into force for the private sector on April 6, stopping employees from “disguising” themselves as freelance contractors in order to pay less tax.
The North Sea energy sector is thought to be among the most heavily impacted, while the Treasury estimates the measure will bring in an additional £2.9billion in taxes by 2024.
A spokesman for the Treasury said “we remain committed to introducing the IR35 rules in April 2020”.
Meanwhile, numerous accountancy firms agree that the budget delay and the election are unlikely to impact the implementation date.
Matt Fryer, group compliance director at Brookson Legal, said the finance bill will likely be passed in the Spring budget.
He added: “With the budget delayed and now a general election before Christmas, it is no surprise some people are wondering whether plans to introduce the off-payroll working rules into the private sector will be delayed. There is no indication that this is the case, however, the IR35 changes will most likely be included in the Spring budget and swiftly pushed through.
“Energy businesses would be foolish to delay their own IR35 preparation until they receive confirmation of the Finance Bill in March.”
His view was largely backed up by Charlotte Edwards, head of IR35 at Anderson Anderson and Brown.
She said: “Should businesses and contractors alike get out the champagne and put down their project plans? I would suggest exercising caution – despite the backlash, it’s clear the government does want to make these changes.”
Elsewhere, Ronnie Brown, head of the corporate tax practice at Burness Paull, said the Finance Bill would likely be pushed through quickly if whoever gets in has a majority, but the delay may put additional pressure on delaying IR35.
He said: “This will increase the already significant pressure that was being applied to delay the introduction of these rules to the private sector.
“Coupled with the delay to Brexit, it may be enough to do so.”
Brian Rudkin, head of employer services at Johnston Carmichael, said while delay to the budget would make implementation harder by April 6, that date has been set by the government and businesses should proceed as such.
From April 2020, as it stands, the obligation will pass to large and medium-sized firms to assess whether the contractors are genuinely self-employed, rather than actually working for the company itself which is engaging the services.
Contractors who work through their own limited companies pay less in taxes but if someone is deemed to actually be an employee, the company using the contractor will need to make additional payments like national insurance contributions.
The move has previously been implemented for the public sector.
A Treasury spokesman said: “We remain committed to introducing the IR35 rules in April 2020. This will ensure that tax that was always due is paid. Contractors who are complying with the existing rules will feel little impact.”
A budget is needed to set tax rates ahead of the next financial year and to comply with the Budget Responsibility and National Audit Act.
The process normally involves 4 days of debate on the budget resolutions, and is followed by votes and a Finance Bill.
The resolutions typically mean that a Finance Bill needs to have its second reading within 30 sitting days of the budget.