As part of the Growth Plan 2022, the government confirmed that the reforms to the IR35 off-payroll working rules will be abolished from the 6th of April 2023.
Off-payroll reforms repealed from April 2023
When delivering his mini-budget on the 23rd of September 2022, the Chancellor announced a wide-ranging series of tax reforms and cuts, focusing on investment, economic growth and making Great Britain more competitive on the global stage. In a surprising yet welcome announcement, the Chancellor unveiled plans to repeal the IR35 off-payroll working reforms introduced in 2017 (for the public sector) and 2021 (for the private sector) from the 6th of April 2023. It is important to note that the repeals do not apply to the entire IR35 legislation, only the reforms introduced in 2017 and 2021. This means that from April 2023, the legislation before the reforms will apply again to all relevant engagements.
What has changed?
As a result of the 2017 and 2021 reforms, end hirers (also referred to as end clients) are responsible for determining the IR35 status of a contractor providing their services through an intermediary, such as a Personal Service Company (PSC). It also became the responsibility of the party in the contractual chain, which makes payments to the PSC account for the relevant income tax and National Insurance Contributions (NICs) for every payment made. However, from the 6th of April 2023, the 2017 and 2021 reforms will be repealed. This means that from this point, it will once again be the responsibility of the individual/PSC to determine their employment status and ensure they are paying the appropriate amount of tax.
What does this mean for end-hirers and contractors?
The legislation currently imposes a significant compliance burden on end hirers and has, in some cases, increased business costs associated with conducting assessments. This, in turn, has resulted in many end-hirers and contractors moving to alternative ways of engaging contractors, such as umbrella companies. The repeals are good news for contractors and end-hirers, who will see this as an opportunity to revert to more tax-efficient ways of engaging with contractors via PSCs. And end hirers will be relieved to pass the status determinations back to contractors.
Many contractors will also see the repeals as an opportunity to operate in a way which will increase their take home pay for assignments deemed outside IR35. It is important to remember that although the reforms have been repealed, IR35 legislation remains in place. It is extremely important to ensure that contractors are conducting legitimate and accurate IR35 assessments such as seeking advice from an employment status specialist who can advise on your determination. If you are deemed inside IR35, umbrella companies offer a complaint and efficient way to get paid.
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Compliance is at the heart of everything we do and we are proud to have achieved the prestigious FCSA accreditation. If you have any questions about IR35 legislation or want to learn more about our FCSA-accredited umbrella service, please call our Sales Consultants on 01707 669023. You can also request a callback for a time that suits you, and a team member will be in touch!