The coronavirus pandemic has changed everything – both for businesses and individuals. As well as the obvious health implications and risks, it also brings with it a wealth of economic issues, and there are fears that many more will lose their jobs alongside the already-growing unemployed in sectors like travel and hospitality.
Those in the tech industry are not shielded from those problems. Many have already argued that the huge dip in spending, productivity and employment that comes as part of the lockdowns mandated by governments to stop the spread of the virus will trigger another economic crisis, much like the one we saw in 2008 – or possibly even worse.
In that scenario, no business will escape some ramifications, as purse strings tighten and companies have to prioritise just staying afloat over growth. And for tech and digital employees, that may mean being laid off and, later, taking part-time or contract work.
There is a small sliver of good news for those companies and people affected by that issue. As part of the government’s measures to counteract the economic impact of coronavirus, Chief Secretary to the Treasury Steve Barclay announced that the government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021.
What the rules mean
The rules are also quite complex and potentially damaging to companies’ talent acquisition and retention efforts – with a recent study by IR35 specialist law firm Brookson Legal finding that that three in five skilled UK contractors said that, if a business that had hired them for contracting work decided that they were caught by the new IR35 rules — and therefore had to be considered full-time staff — they would consider going elsewhere. The chances of a “brain drain”, the study said, are high.
For contractors, the rules will mean they would have to pay national insurance and businesses would have to provide benefits like paid holidays. According to The Register, it is estimated that about 170,000 self-employed contractors will be hit by the changes.
Barclays said the decision to suspend IR35 is in “response to the ongoing spread of Covid-19 to help businesses and individuals,” – but he noted it will nonetheless go ahead as planned next year. “This is a deferral, 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,” he said.
Although there are many huge changes included in the government’s coronavirus emergency financial measures, the IR35 delay is still considered pretty significant by some.
The Register quotes James Poyser, CEO of inniAccounts and founder of the offpayroll.org.uk campaign group, as saying that the move is good news. He said: “means that contractors can now switch gears and put all of their energy into the wider challenges we’re all going to face.”
“We’re going to have to keep a watching brief on the market in the coming months. Whilst the wider economy is due to enter a turbulent period, it’s clear by the scale of the £330bn financial measures made available by the Treasury today that the government wishes to keep the economic engine running as much as they can. We hope these two factors combined have an impact on the contracting market.”
And Information Age quotes Andy Vessey, head of tax at insurer Larsen Howie as saying: “Given that end clients and recruiters have now another 12 months to prepare, I would expect the 12 month soft landing assurance previously promised for this year to be withdrawn when the reform is implemented in April 2021, particularly as there will be a need to recoup as much tax revenue as possible to repair the huge dent in the Treasury’s coffers caused by Covid-19.”
“In other words, the market has twelve months to get this right. After that, there will be strict enforcement.”
RedCat Digital has developed a series of products to help contractors and employers deal with the challenges of IR35. If Vessey is correct, and enforcement comes down hard next April, now is the time to prepare. Speak to RedCat consultants to find out more.