Last updated: 19 October 2022
IR35 Repeal Scrapped
The IR35 reforms will no longer be repealed since the new chancellor, Jeremy Hunt has reversed almost all tax decisions set in Truss and Kwarteng’s ‘Mini Budget’.
Last updated: September 2022
What Is IR35?
IR35 is UK tax legislation for contractors that would otherwise be considered employees.
Contractors often pay a smaller percentage to the government because they claim their own costs such as insurance, marketing, and equipment. They can also take some of their income as dividends, that are not subject to National Insurance.
IR35 was designed for contractors who do not have multiple clients and have similar costs to an employee, exempting them from contractor benefits.
IR35 changes timeline
April 2000: IR35 introduced – contractors responsible for assessing their IR35 status.
April 2017: Off-payroll Working Reforms – public sector companies deemed responsible for their contractors’ IR35 status.
April 2021: Off-payroll Reforms extend to medium-large private sector companies.
April 2023: Off-payroll Reforms intend to be repealed – Return to contractors responsible for their IR35 status.
What were the problems with the off-payroll reforms?
In May, a public accounts committee report found:
- ‘Widespread non-compliance’ with the off-payroll Reforms due to lack of guidance.
- The costs and risks were putting companies off hiring contractors.
- Double taxation was wrongfully occurring with employers deducting their NICs from contractors’ rates.
- Contractors were wrongly categorised as inside IR35. 69% of the 12,327 contractors in a ContractorCalculator survey claimed their assessment was unfair.
Self-employed under IR35 pay employment tax without the employment benefits. Commonly known as ‘zero rights’ employment. This is why, in her race to PM, Liz Truss pledged a review.
What the 2023 off-payroll repeal means
Irrespective of many contractors’ hopes, IR35 is not dead.
The government intends the removal of the off-payroll Reforms from April 2023 meaning the responsibility of IR35 status determination would go back to the contractors.
Contractors that are eligible could still be susceptible to ‘zero rights’ but clients will be less hesitant to hire contractors and contractors would no longer fear being mis-categorised.
Chris Bryce, Chief Executive of FCSA, welcomes the legislation but wonders how quickly contractors will be re-engaged. He says that the government’s previous ‘mis-step’ has meant some contractors have closed their business’ already.
Hopefully, HMRC will ensure better laid-out legislation for contractors to build their businesses without fear of penalty.
In conclusion, the most recent IR35 news means that from April 2023, UK firms should not be deterred from hiring contractors. At Conspicuous, we urge companies to hire workers depending on their technically qualified and cultural fit. We can help you to do just that.
Contact our recruitment team on +44 (0) 1483 233 000 or email firstname.lastname@example.org.
Read our first IR35 update here.
We’re not providing legal / accountancy advice – check with a professional.