Finance Bill introducing deferred IR35 reforms passes second reading

The Finance Bill 2020, which will defer the date off-payroll working changes (IR35) will come into effect to 6 April 2021, has passed its second reading in Parliament.

The reforms were originally due to take effect on 6 April 2020 but were deferred by one year due to the impact of the Covid-19 (Coronavirus) pandemic.

The bill will now move to the committee stage within Parliament.

Jesse Norman, financial secretary to the Treasury, said: “This ways and means motion enables the government to amend the current Finance Bill in order to implement reforms to the existing off-payroll working rules. We are presenting it separately because we wanted to extend the date at which it comes into force by one year to April 2021 in recognition of the effects of the coronavirus pandemic. The off-payroll working rules have been in place for 20 years. They are designed to ensure that people working like employees but through their own companies pay broadly the same income tax and national insurance contributions as people who are directly employed.

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“To help businesses and individuals deal with the economic impacts of Coronavirus, on 17 March the Government announced that the reform to the off-payroll working rules would be delayed by one year from 6 April 2020 until 6 April 2021. The amendment would delay the introduction of reform by a further two years to April 2023, but it is hard to see any genuine rationale for this further delay.”

David Davis, Conservative MP, who has been campaigning for the reforms to be further deferred, added: “The government is right to postpone the IR35 reforms, but it should have been for longer. We now must use this time to have a wholesale review of the entire system.”