IR35 reforms are repealed by Government, what does this mean?

Ayesha Daya
Ayesha Daya

Published: October 3rd, 2022

3 min

Within the mini-budget, the Chancellor Kwasi Kwarteng has announced that the UK government will scrap the 2017 and 2021 reforms to the IR35 off-payroll working rules.

As part of the changes and subject to certain criteria being met, HMRC transferred responsibility for assessing whether someone was a disguised employee from the individual to the organisation. Off-payroll working rules are designed to ensure that an individual who works like an employee, but through their own limited company such as personal service company, pays broadly the same income tax and national insurance contributions as other employees. It meant that the responsibility for determining whether the off-payroll working rules apply shifted from the individual's PSC to the client organisation engaging them.

What does this U-turn mean?

Essentially contractors will return to being responsible themselves for ensuring they pay the correct amount of tax and national insurance contributions for the services provided. It is expected that numerous businesses will likely welcome this announcement due to the IR35 rules having created significant compliance and tax risks for businesses. However, the repeal of the reforms to the IR35 rules does not mean their end altogether. Businesses will remain exposed to tax risks through other tax rules and tax offences i.e., if they pay contractors off-payroll when they know that the contractors should be taxed as employees. Although the initial reaction to the change in these rules may be positive, there will likely be frustration among businesses regarding the significant amount of time and money that has been spent on compliance with the rules, and there remains uncertainty regarding what might come next.

The Chancellor has confirmed that compliance will be kept under review and if contractors continue to apply the rules incorrectly, it is likely that we will see further changes in the future, albeit in a different form.

What should you do between now and April 2023?

If you have any queries in respect of the U-turn on the IR35 reforms or the contracts and procedures you may require to formalise these relationships and minimise risks relating to the above, contact John Pickervance, Head of via email or phone on 0333 207 1134. Alternatively send any question through to Forbes Solicitors via our Online Contact Form.


For further information please contact Ayesha Daya

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