In his ‘mini Budget’, Chancellor Kwasi Kwarteng announced that the Off Payroll working rules will be abolished from April 2023.
[Oct 17th – Chancellor Jeremy Hunt has cancelled the Off Payroll repeal described below. So nothing changes!]
This means that the original IR35 rules will return from this date.
The Growth Plan sets out first steps in taking complexity out of the tax system. The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.
You can read more in section 3.44 of the official document.
This is excellent news for businesses, and should revitalise the contracting market, following several dreadful years for the industry.
Does this mean IR35 will be repealed?
The ‘off-payroll’ rules are contained within Chapter 10 of the ITEPA 2003, whereas the original IR35 rules are incorporated into Chapter 8.
Despite being two separate (but related) pieces of legislation, the term ‘IR35’ is often used to refer to both.
Section 10 (the ‘off payroll’ rules) is to be scrapped across both the public and private sectors.
Section 8 (the ‘original’ IR35) will remain.
What will happen in April 2023?
From the limited amount of information provided in the Budget document, it would appear that things will go back to the way they were several years ago; contractors themselves will be responsible for administering their IR35 status.
Companies have spent time and effort in their attempts to comply with the ‘off payroll’ rules – this will take some time to untangle. The blanket bans on limited company contractors will surely disappear – but this may also take some time as companies will need time to readjust to the status quo.
What will happen between now and April 2023?
Importantly, the current off-payroll rules remain in place, with end-clients responsible for determining the employment status of their contract workforce.
Will clients be less willing to hire new contractors in the short-term, taking on the risks associated with off-payroll compliance? In just over 6 months, they will be able to hire contractors as they did previously – but without the associated risk, which will sit with the contractor – once again.
The answers to these questions will surely become clearer as April 6th 2023 draws closer, a date which is eagerly awaited by the entire contracting world.
Read our 12 essential FAQs on the repeal.