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IR35 delay added to £330bn virus aid package

The government’s £330bn "Whatever it takes" response to the economic impact of coronavirus also brought comfort to freelancers with a 12-month delay to the IR35 off-payroll rules for private sector engagers.

18th Mar 2020
Practice Editor AccountingWEB
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The Chancellor prepares for his Budget speech with his team
HM Treasury

Chancellor Rishi Sunak joined the Prime Minister at Tuesday's Downing Street press briefing to overhaul his £30bn Budget support package just six days after delivering it.

“I promised to do whatever it takes to support our economy through this crisis – and that if the situation changed, I would not hesitate to take further action. That is what I want to begin doing today,” said Sunak.

As well as enhancing and extending many of the measures announced last week, Chief Secretary to the Treasury, Steve Barclay announced in the House of Commons that the government was delaying the roll-out of the new private sector IR35 regime until 1 April 2021.

While a total of £330bn has been committed to support businesses and individuals, the IR35 delay came in response to growing calls for the government to offer support to the self-employed and freelances.

Equivalent to 15% of UK GDP

The biggest single element in the Chancellor’s rescue package is a package of £330bn bank loan guarantees to help small and large businesses manage cashflows during the pandemic. The sum is equivalent to 15% of UK GDP. 

“That means any business who needs access to cash to pay their rent, the salaries, suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms,” said Sunak.

The Chancellor said his economic package would be delivered through offering liquidity support to large firms with a new loan scheme from the Bank of England. For small and medium-sized firms, Sunak increased the new Business Interruption Loan Scheme announced at last week’s Budget from £1.2m to £5m of loans with no interest due for the first six months.

He said further action would come as the situation evolved through new legal powers in the Covid Bill which enables the government to offer further financial support deemed necessary to businesses.

12 month business rate holiday

Sunak also extended the business rates holiday for all businesses in the retail, hospitality and leisure sector for 12 months. The Chancellor’s universal business rate holiday goes one step further than last week’s announcement which was only eligible for the businesses in those sectors with a rateable value below £51,000.

Sunak offered further £25,000 grants to retail, hospitality and leisure businesses in smaller premises with a rateable value over £15,000 and below £51,000.

And in another adjustment to last week’s Budget, the Chancellor enhanced the small business rate relief grant of £3,000 to £10,000. The small business grant caused a lot of interest on Any Answers last week, as AccountingWEB readers struggled to ascertain which businesses qualify.

Hospitality and leisure businesses had voiced concern about the effect the government’s advice to avoid pubs, clubs and theatres would have on their insurance, but Sunak confirmed that this advice is sufficient for those businesses to claim insurance if they have appropriate business interruption cover for pandemics in place.

The Chancellor also confirmed that mortgage lenders have agreed support struggling customers as a result of COVID-19 with an up to three month payment holiday.

“We have never faced an economic fight like this one,” concluded Sunak.  “But we are well prepared. We will get through this. And we will do whatever it takes.”

Reaction to Sunak’s coronavirus measures

ContractorCalculator chief executive Dave Chaplin and director of the Stop The Off-Payroll Tax campaign welcomed the IR35 delay, but wanted to see more: “With contractors and freelancers facing losing work with no sick pay, it was clearly the right and sensible thing to do.”

Qdos CEO, Seb Maley, added: “Given the economic challenges that lie ahead of the UK, now certainly would not have been the right time to roll out needless tax changes that endanger hundreds of thousands of contractors’ livelihoods.”

Mike Cherry, the chairman of the Federation of Small Businesses (FSB), also welcomed the government’s upgraded business support package: “Small firms are having their futures threatened in the here and now. They need support in the here and now.

“This unprecedented package of loan guarantees, business rates breaks and cash grants marks a hugely welcome step forward. The key now is to deliver these measures within the coming days with no hold ups at banks, local authorities or central government.

“Some small businesses are already on the brink – they need time and space from landlords, HMRC and lenders over the next few days before these interventions take effect.”

However, tax campaigner Richard Murphy questioned the loan-based response in his blog: “Rishi Sunak offered UK business the last thing it needed yesterday. I think he did so to keep this cost off the government's deficit. He tried to put it on the government's balance sheet instead. But that was a gross error of judgement.”

According to Murphy, businesses facing a catastrophic drop in revenue run the risk of trading insolvently if they take on additional loans to tide them over their widening cash gaps. By adding to their outstanding obligations, the directors would illegally prejudice existing creditors by taking the loan, he wrote in a worked example.

“Only the government can bear the cost of these losses. And it has to bear them if it wants to avoid the most appalling commercial catastrophe. If that is not to arise during the course of the rest of 2020 then it has to simply accept these costs now and stop pretending that they can be dealt with through loans to businesses or grants of inconsequential amount.”

Replies (19)

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By thomas34
18th Mar 2020 09:45

I'm sure Rishi Sunak will be grateful to Richard Murphy for his advice.

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Replying to thomas34:
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By dstickl
18th Mar 2020 10:30

... such is the uniform rule of English law in Rotherham etc England, and its alleged abuse by our distinguished English etc legislators and/or rulers of law !!!!

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By AndyC555
19th Mar 2020 16:49

You should see Murphy's other demands.....

*guarantee funding to banks to ensure their survival, but on the condition that they are nationalised immediately without compensation
*Nationalise all the utilities (electricity, gas, water)
*Introduce food rationing
*new commissions are required, with emergency powers, on:
1) Recreating the economy after the demise of financial capitalism;
2) The future of land ownership;
3) The future of work;
4) The new social safety net, including for pensions, that we are going to need, which is linked to the future of tax;
5) Surviving the climate crisis that is to come;
6) Rebuilding our state so that it represents us all;
7) Preparing everyone for the world we’re going to live in by rethinking education;

I wonder if Murphy sees himself as having an important role in the new government of the Union of British Socialist Republics?

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By brandysnap10
18th Mar 2020 10:24

I'm interested to know what they are planning for other small businesses who don't fall into the retail, hospitality and leisure sectors.

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By ireallyshouldknowthisbut
18th Mar 2020 10:30

or indeed those without business premises.

or indeed what the delivery mechanism might be for those that do.

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By petestar1969
18th Mar 2020 11:51

So the vast majority of the support package announced yesterday was in the form of guarantees for bank loans? Encouraging people to get into debt is why the economy is already knackered and wasn't able to offer much resistance to the shock from this virus panic.....Great, NOT!

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By Michael C Feltham
18th Mar 2020 12:01

As already pointed out, a huge number of small businesses have no trade premises since they are based at home. Plumbers, decorators etc, cab drivers and various contractors.

The growing danger is the domino effect.

As staff are not paid, then they cannot debt service their borrowings, buy goods and services etc; then the suppliers of goods and services have to struggle to pay THEIR staff and so on.

As always, Government has failed to clamp down hard on lenders: with the lowest Base Rate ever, Credit Card rates are still around 29% APR! Small Business lending interest rates by banks is far too greedy.

SMEs represent circa 50% of GDP and employment.

Government will not be receiving tax revenues; local authorities will struggle with council Tax receipts; VAT will fall rapidly.

Since the UK is still massively over-borrowed in Sovereign Debt, yet the Buffoon and Sunak are proceeding to chuck public money around as did Gordon Brown.

A Three Month Mortgage Holiday is merely a bagatelle: if an obligor cannot pay, is thrown out of work (With tens of thousands of others!), then their chance of new real work is remote...

I believe in holistic terms of reference that sadly, banks and lenders as well as commercial landlords will have to share a significant chunk of the pain: either this, or the UK economy will implode.

Example:

https://en.wikipedia.org/wiki/Payday_loans_in_the_United_Kingdom

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By Ian McTernan CTA
18th Mar 2020 12:57

How about scrapping Section 24 permanently to help landlords who will soon be further hit with measures to protect tenants?

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Replying to Ian McTernan CTA:
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By carnmores
18th Mar 2020 16:24

Oh how my heart bleeds for them

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By johnjenkins
18th Mar 2020 14:04

I am biting my tongue as I post this, but RM is spot on.
You can see the scenario develop. Loan for £20K but home taken as security. The rest we all know.
I do believe universal credit will be paying out a lot more.
Government receipts will be well down. No more money for MTD (perhaps).

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Jennifer Adams
By Jennifer Adams
18th Mar 2020 16:51

I'm going to say something controversial here and more in hope than anything else... dare we hope for a delay in MTD?

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By ireallyshouldknowthisbut
18th Mar 2020 17:03

I thought it was "no early than" April 2021?

Which is politician speak for "not happening any time soon"

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Replying to Jennifer Adams:
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By Gone Sailing
18th Mar 2020 18:51

MTD is live - the soft landing year is nearly done - nothing to delay ??

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By johnjenkins
19th Mar 2020 09:13

Quarterly accounts (oops sorry updates)???????????

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By Gone Sailing
19th Mar 2020 17:11

Ah yes there is that - I had deliberately forgotten.

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Replying to Gone Sailing:
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By johnjenkins
20th Mar 2020 13:36

Or were you making sure we hadn't dozed off?

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By Gone Sailing
18th Mar 2020 18:53

Delaying IR35 has replenished our coffers for another year.

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By Sheepy306
18th Mar 2020 19:18

It will be interesting to see what happens here then. As many of our contractor clients have already either had their contracts terminated, been made full-time employees, or have accepted significantly lower day rates under the payroll rules, so I would imagine too late for the majority of contractors to do anything about and for the decisions to be reversed. A few of the contractor clients that were terminated are now struggling to find any replacement job as the banks understandably aren't keen on taking people on right now in the current unknown environment. I'm hoping that things unfold favourably.

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Replying to Sheepy306:
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By Payroll Pete
18th Mar 2020 20:54

Also, if they have already accepted on-off-payroll conditions, ie PAY under an umbrella they can't go back as HMRC will come back in 3 years time and determine that you were within inside IR35 all along, cough up.

The people who have gone abroad aren't coming back.

The jobs the banks have already offshored to infosys, wipro, cognizant, accenture aren't coming back.

Dawn has cost the taxpayer a bundle. And it aint' coming back.

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