Unveiling his mini-budget, new Chancellor Kwasi Kwarteng has announced that reforms to IR35 rules will be repealed from April next year. The news means that, from April 6 2023 onwards, contractors working for an organisation through an intermediary will once more be responsible for determining their own employment status and paying tax and National Insurance contributions (NICs).
Introduced for public sector organisations in 2017 and in the private sector in April 2021, IR35 reforms shifted the responsibility for determining employment status from contractors to the organisations that hired them. The rules were intended to clamp down on supposed tax evasion but have been widely criticised for their impact on the UK’s freelance workforce and the administrative burden they placed on organisations hiring contractors.
The Chancellor’s Growth Plan, published after the delivery of the mini-budget, stated: “The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.”
The announcement has been extremely well received by figures within the UK contracting industry, many of whom have spent years calling for the repeal of IR35 reforms. However, some have expressed concern that elements of the off-payroll working rules will remain in place and have called for the government to set out a plan for reversing the rules entirely.
Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), commented: “We are delighted that the new Chancellor agrees with what we have been saying for years – that the 2017 and 2021 reforms create unnecessary complexity for contractors and businesses. It is with huge relief that we welcome this dramatic shift in government thinking”
“As delighted as we are with the news, we remain concerned that the underlying IR35 rules will stay in place, and we hope to work with the government to make further progress on this issue in the weeks and months ahead. But for now, this is a watershed moment and will be a tremendous boost to thousands of contractors who have been unfairly penalised by these damaging rules.”
Seb Maley, CEO of IR35 advisory firm Qdos, added: “Repealing IR35 reform is a huge victory for contractors. The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them. The fiscal changes announced today are likely to go down as some of the most pro-contracting in memory.”
“The government mustn’t waste time, though. The last thing contractors and businesses impacted by IR35 need is uncertainty. A clear and robust roadmap for reversing IR35 reform in both the public and private sectors is needed.”
