IR35 changes delayed due to COVID-19

18 March: Changes to the off-payroll working regime will not take effect until April 2021 due to the coronavirus pandemic, HMRC confirms.

HMRC has confirmed to ICAEW’s Tax Faculty that reports on Twitter yesterday evening that the IR35 changes would be deferred by 12 months were accurate.

In light of the coronavirus pandemic, changes due on 6 April 2020 will now be implemented from 6 April 2021, meaning that the existing off-payroll working rules will continue for a further year.

This gives businesses a further year to make the necessary changes.

For those which have already made changes to reflect the new rules, HMRC has said that Status Determination Statements (SDS) will have no standing in law and will not be used as evidence in any enquiry dispute during the coming year.

The legislation implementing changes to off-payroll working is now expected to be published later this year and HMRC will be updating its Employment Status Manual to reflect this as soon as possible.

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Existing off-payroll working rules that will remain in force until April 2021:

  • Private sector: Where work is undertaken for a private sector engager, the worker remains responsible for determining the tax status of the contract and ensuring that the IR35 rules are applied to any payments made to their PSC if the work looks more like an employment contract.
  • Public sector: Where work is undertaken for a public authority, the engager, rather than the worker's PSC, is responsible for determining the tax status of the contract, employed or self employed, and if it looks more like employment, must ensure that any payments made to the worker under that contract are paid through a payroll.

Note added 19 March 2020: HMRC has asked us to share the following note with our members

The government has announced it is delaying the reforms to the off-payroll working rules (IR35) from 6 April 2020 to 6 April 2021.

This deferral has been announced in response to the ongoing spread of Covid-19, to help businesses and individuals deal with the economic impacts of the pandemic. This is a deferral of the introduction of the reforms, not a cancellation.  

The Government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly. The policy will be introduced on 6 April 2021, representing a 12-month delay.

Due to this delay we will be pausing the customer support and education programme that HMRC has been delivering to help customers get ready. We will resume education and support activities at the appropriate time ahead of the reform in April 2021.

This deferral means that the current off-payroll working rules in the public sector, introduced in 2017 will continue to operate as they do now. Public authorities will not need to implement the changes on status determination statements or implement status disagreement processes until April 2021. Customers can refer to existing guidance on the current rules for public authorities for more information:

HMRC developed a wide range of guidance and support to help customers prepare for the changes, which are now delayed. These products will be updated shortly and remain available to access to help you prepare for the changes due in April 2021.

Further support from ICAEW on the coronavirus outbreak