The UK Government has postponed the introduction of a much criticised tax reform that would have had major implications for North Sea contractors.
Steve Barclay, chief secretary to the Treasury, said the deferral of changes to off-payroll working rules would help businesses and individuals left struggling by the Covid-19 outbreak.
The rules, called IR35 and first implemented in 2000, aim to stop employees registering themselves as freelance contractors in order to pay less tax.
To improve compliance, the government in 2017 made public sector organisations responsible for determining employment status.
That same responsibility was to be extended to every medium and large private sector business in the UK from early next month.
Energy Voice reported earlier this month that scores of contractors were poised to leave the North Sea oil and gas sector over that change.
Union boss Jake Molloy said workers were having to sign on with an agency, or “umbrella company”, and were making all of the payments expected of a full-time staff member, but receiving “none of the benefits”.
Speaking in the House of Commons this evening, Mr Barclay said the reform would be delayed by a year.
He said: “The government is postponing the reforms to the off payroll working rules, IR35, from April 2020 to April 6, 2021.
“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.
“This is not a cancellation and 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.”
Aberdeen South SNP member Stephen Flynn said of the postponement: “This suspension of the implementation of IR35 is a sensible measure from the government at a time of unprecedented concern for us all.
“We know that these changes would have particularly impacted workers within the oil and gas industry so I am glad the UK Government is being proactive on this issue.
“What we need now is confirmation as to how they intend to provide income support for individuals and families across the UK and we need those answers now – there can be no more half-measures.”
Seb Maley chief executive of contractor tax adviser Qdos said: “The government has seen sense and made the right call in these unique circumstances.
“Given the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.
“That said, this is only a delay, albeit a very welcome one. It does, however, give private sector firms vital time to prepare for reform, which can only be a good thing for contractors. What matters now is that businesses use this time wisely.”
Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said on Twitter: “Very sensible move by government. It would have done serious damage to self-employed businesses in any circumstances, so right that it’s paused for at least a year in this grave and unprecedented situation. Trouble is, lots of damage has already done.”
James Poyser, chief executive of accountancy inniAccounts and founder of offpayroll.org.uk, said: “I do welcome this pause – it means that contractors can now switch gears and put all of their energy into the wider challenges we’ll all going to face in the coming months.
“Whilst nobody can rest easy right now, this announcement will make many contractors feel much better about the year ahead.”