UK: IR35 Implementation Moved to April 2021

The IR35 tax regulation has been the subject of scrutiny among lawmakers and businesses for more than a year. Originally set to go into effect in April 2020, the UK government has announced that it will postpone implementation until 2021 due to the coronavirus disruption. Beginning on April 6, 2021, mid-market and large companies will be responsible for carrying out IR35 reforms, ensuring that workers are properly classified and taxed according to their employee or contractor status. As part of the plan, recruitment agencies will be responsible for the proper classification of the workers they provide.

While contractors self-determined their status in the past, the new rules put greater onus on companies to accurately classify their workers. Accordingly, contractors who are reclassified as employees may find themselves making significantly less, as a larger portion of their earnings goes to higher income tax and national insurance.

Takeaway: While the IR35 regulation is postponed, it should certainly be a factor in 2021 planning. The most sustainable approach is for organizations to focus on making their classifications as accurate as possible, particularly if they engage more flexible workers after the pandemic shutdown. AGS can provide input and guidance on accurate classification, applying industry expertise and technology to speed up the typically burdensome analysis process.

UK: IR35 Implementation Moved to April 2021

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