Controversial IR35 tax changes have been delayed by 12 months as the coronavirus crisis continues to escalate.

The new rules were due to come into force next month, just weeks after being confirmed in the chancellor’s first budget, potentially causing widespread disruption across the construction industry as thousands of freelance workers were braced for a move back to PAYE.

Steve Barclay, the chief secretary to the Treasury, confirmed the news in Parliament on Tuesday night, but said the move to April 6 2021 was a “deferral, not a cancellation and the government remains committed to reintroducing this policy.”

Current rules allow workers to be employed via a personal service company (PSC) which determines whether IR35 tax rules should apply. That responsibility was due to shift from April to contractors who will determine employment status.

Freelance workers feared losing out through higher tax payments while contractors also faced bigger bills from direct employment.

Ged Mason, CEO of the Morson Group, welcomed the deferral and said: “The treasury’s decision to delay the introduction of IR35 reforms comes at a poignant time for UK industry and will see many businesses which rely on flexible talent and contractor populations take a sigh of relief. 

“This delay is therefore a sensible move and shows the government’s backing for UK enterprise by taking the necessary steps to protect businesses and the contingent workforces that they are often so reliant on.    

“However, this is very much a delay and not a cancellation, with the IR35 reforms in the private sector still due to come into force April 2021. This 12 month extension will ensure that organisations now have a major head start on successfully meeting the new 2021 deadline.”