I think many of us have been expecting, or at least hoping for, a much needed review of the IR35 off-payroll rules now that Liz Truss has become PM.
It was a shock today to hear that the 2017 public sector and 2021 private sector changes are now to be scrapped in April 2023!
Speaking to the House of Commons Kwasi Kwarteng said from April, 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 2017 and 2021 reforms to the off payroll working rules required the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment and thus whether IR35 applied.
Kwarteng has repealed these reforms as part of the first steps in taking complexity out of the tax system.
He said: “To achieve a simpler system, I will start by removing unnecessary costs for business. We can also simplify the IR35 rules and we will. In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.
“So as promised, by the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”
The changes will mean workers will again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions.
Due to the fact that the 2017 and 2021 changes forced many genuinely self employed workers to be 'caught' by the legislation, the proposed repeal will minimise the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.
Time will tell if those in current inside contracts will risk changing their status come April, but let's hope it reduces the ongoing confusion and cost that has surrounded the off-payroll rules for the last 5 years!