In a welcome but late move, Her Majesty's Revenue and Customs (HMRC) confirmed on 7 February 2020 that the imminent IR35 reform will apply only to supplies of labour provided on or after 6 April 2020.

IR35 applies where an individual provides their labour to an end user via their own personal services company or other intermediary (PSC), in circumstances where if the individual were hired directly, they would be an employee of the end user (for further details please see "IR35 reforms from April 2020").

In a fundamental change to the current IR35 rules, medium and large-sized end users (rather than individuals) will be required to determine whether IR35 applies for any payments made on or after 6 April 2020. If IR35 applies, the fee payer (generally the entity which has the contractual relationship with the PSC) must deduct pay-as-you-earn and employee national insurance contributions (NICs) from the fees that it pays to the PSC as well as paying employer NICs and, where appropriate, the apprenticeship levy.

HMRC's latest announcement confirms that the new IR35 rules will apply only where the individual also provides their labour to the end user on or after 6 April 2020. In other words, the IR35 reform will not apply if all of the work is performed before 6 April 2020 – even if payment for the work is made after this date.

With less than two months to go before the change takes effect, many businesses will consider HMRC's announcement and its recently issued detailed guidance too little too late as they grapple with the significant administrative burden and cost implications of the reform.

In addition to the government's own review of IR35 (which was expected to conclude mid-February), the House of Lords launched an inquiry into IR35 on 4 February 2020. However, neither of these processes are expected to result in any postponement to the changes.