IR35 Off Payroll repeal reversed

With events at Westminster shifting like quicksand, newly appointed Chancellor Jeremy Hunt has issued an emergency financial statement overturning much of last month’s “Mini Budget”. 

 Of most interest to the intermediary sector is that the repeal of the Off Payroll IR35 rules, announced by Kwasi Kwarteng on 23rd September has been reversed.

What does this mean? 

 So what does this mean for contractors, recruiters and end clients?  

 Today’s announcement is simply a “repeal of the repeal”. 

 Essentially, it is business as usual. End clients will continue to determine IR35 status for PSCs they are engaging, and will continue to issue Status Determination Statements for these contractors. 

 The repeal of the IR35 Off Payroll rules would have meant that from April 2023, responsibility for determining IR35 status would have reverted back to the contractor, both in the public and private sectors. 

 No change, no uncertainty 

Today’s announcement is likely to elicit disappointment among some parties in the supply chain, not least contractors who felt they were wrongly classed as inside IR35, or who were on the wrong end of clients’ blanket decisions to use PSCs at all. 

 However the repeal would not have been a time machine back to 2016. In fact going back to contractor determinations, especially on such a tight timescale, would have been fraught with uncertainty and risk. 

 For example, if a client made a status determination putting someone inside IR35 prior to April 2023, and the contractor was suddenly to declare themselves outside IR35 after April 2023, this would have been a difficult position to defend with HMRC.  

 There was also the potential for HMRC to turn to other tax legislation in PSC contracting arrangements, such as the Criminal Finance Act, which could make a client liable if they were aware of tax evasion in the supply chain. 

 So while reversing the repeal of the IR35 Off Payroll rules won’t necessarily be a popular one, it avoids the uncertainty of radical change, especially in an already turbulent economic climate. 

 Liquid Friday’s Director of Group Operations, Joe Taffurelli, commented:
“I am pleased that the sector now has certainty. IR35 has been a challenging piece of legislation since its inception, however, we now have some stability for the foreseeable future. The past few weeks have been a really interesting time for the industry, it highlights how important tax compliance is to the Government and partnering with strong providers is critical. Now the industry can focus its efforts on helping with reversing an impending recession and get working!” 

We are here to support contractors and agencies with any help they need with IR35 compliance or concerns. Get in touch with your questions.