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In one of his first actions as new Chancellor of the Exchequer, Kwasi Kwarteng, has reversed the IR35 reforms, revealing the decision during his mini budget on 23 September 2022.
29 September 2022
Insight
The Chancellor of the Exchequer stated in his speech in the House of Commons that the reforms to off-payroll working have added unnecessary complexity and cost for many businesses, and would therefore be reversed.
The IR35 reforms first came into effect in the public sector in 2017 and the private sector in April 2021, shifting the responsibility for determining a worker’s employment status from the employee to employer.
It also imposed the responsibility for handling all tax and national insurance contributions (NIC) for self-employed contractors and agency workers on to the employer, which was often an onerous task.
Mr Kwarteng has announced that from April 2023, existing intermediaries legislation will apply, making contractors responsible again for their own tax liability.
Contractors and businesses will likely celebrate the reverse in position as there were a number of teething problems when the IR35 regime was introduced, which have continued throughout its lifespan. The reversal of the IR35 reforms will be welcomed by many as it not only removes the significant threat of tax liability, but also gives greater flexibility when recruiting skilled temporary workers to plug skills gaps.
The change does not mean that the employment status question goes away, but it does mean that if a contractor engages with a company (an end user) through a personal services company (PSC), it will be the responsibility of that personal services company to make an assessment as to the employment status of the contractor (for tax purposes). Employers remain unable to engage workers through PSCs where the reality of the relationship does not reflect an end user/contractor arrangement.
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