"The Government has already delayed this reform until April 2021 in response to COVID-19. The legislation has now received Royal Assent."
The Government has already delayed this reform until April 2021 in response to the COVID-19 crisis. However, there will not be a further delay. The legislation has now received Royal Assent, and the reform will be implemented in April 2021 as announced.
It is important to note that this change is about compliance with existing tax law, and is not a new tax. The existing off-payroll working rules, that have been in place since 2000, are designed to ensure that where two people are working in the same way, but one is directly employed and one is working through a company, broadly the same amount of tax is paid. The reform in the private and voluntary sectors will improve compliance with these rules by moving responsibility for determining whether the rules apply from the individual’s company to the client engaging them.
The reform was originally announced at Budget 2018. Many businesses were prepared for the reform to be implemented in April 2020 as originally planned, and HMRC have undertaken a significant programme of education and support to ensure that large and medium-sized organisations are ready. Since the delay businesses have been putting in place preparations for April 2021, and another postponement would lead to uncertainty for businesses and potentially additional costs.
Further delaying implementation of these changes would also have other very significant drawbacks. Non-compliance with the off-payroll working rules outside the public sector is expected to cost £1.3 billion per year by 2023/24 if not addressed. As well as the fiscal cost, delay would prolong the fundamental unfairness of taxing two people differently for the same work. Contractors are an important part of the UK economy and the Government values their contribution. However, that should not mean that contractors should pay less tax than employees, when their engagement meets the tests of an employment relationship. Further delay would also extend the disparity between the private and voluntary sectors, and the public sector, where the reform has been in place since 2017.
HMRC have set up dedicated teams to provide education and support to all businesses, public bodies and charities affected by the off-payroll working rules reform, and provided extensive support ahead of the original implementation date of April 2020. HMRC have used the extra time afforded by the delay to conduct a comprehensive evaluation of the education and support package offered during 2019/20, including considering feedback from organisations. This has been used to inform the design of an enhanced programme of further targeted support ahead of implementation in April 2021. The programme includes topic-based webinars and workshops as well as targeted 1-2-1 calls with affected businesses. This is further supported by updated off-payroll guidance, online learning and HMRC attendance at stakeholder events.
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