HMRC has shelved plans to change IR35 legislation for at least one year. The Association of Independent Professionals and the Self-Employed (IPSE) claims to have received confirmation that no new legislation relating to IR35 and personal service companies (PSCs) would be published in 2016-17.

At the 2015 budget, the Chancellor George Osborne indicated that IR35 Intermediaries Legislation had to be changed because it wasn’t working properly. After a period of consultation, it seems that ministers want more time to assess the impact that any changes will have on contractors.

IPSE also confirmed that HMRC is reformulating the Employment Status Indicator (ESI). ESI is a tool used to check whether an individual or group of workers is employed or self-employed under the government’s rules. But HMRC stressed that this will initially remain as a voluntary and anonymous test that is designed for practical assistance, rather than as a trap to catch contractors out.

IPSE Director of Policy, Simon McVicker, said: "The Government is back in listening mode. Reaction to the IR35 discussion document, and the closely related travel and subsistence consultation, was vociferous and it has forced a rethink of these proposals. We are pleased HMRC seems to have to have taken on our concerns.

“There may well be more developments to come on this story, but for the time being at least we are pleased to be able to reassure IPSE members there will no changes to the legislation in 2016. It is our hope we can now work with the Government to find an acceptable way forward for all parties."

Miles Grady, Director at Umbrella.co.uk said: “This is great news for contractors who aren’t already working under IR35. Large sections of the community were worried that IR35 was going to be expanded to include the vast majority of contractors, but that does not seem to be the case.

“The announcement is particularly welcome because it comes just after the announcement at the Autumn Statement that anyone operating under IR35 will be unable to claim travel and subsistence expenses relief from April 2016.”