Off-payroll working (IR35) reforms set to be reversed

Update (17/10/2022): the new Chancellor, Jeremy Hunt, has scrapped the plans to repeal the Off-payroll IR35 Reforms, which Kwasi Kwarteng previously announced in his mini-budget - learn more.

It’s fair to say that even the most ambitious gambler wouldn’t have put money on the Chancellor, Kwasi Kwarteng, announcing that off-payroll working (IR35) reforms are being scrapped, but that’s precisely what happened in last week’s mini Budget.

The Chancellor stated: “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. We will repeal the 2017 and 2021 reforms.”

Similar to the corporation tax and National Insurance changes being overturned, the IR35 reversal has been widely welcomed, with many contractors hardly able to contain their joy.

Is IR35 dead?  

The reversal announcement refers to the 2021 changes for the private sector and 2017 changes for the public sector, which saw the responsibility of determining the status of contractors passed over to the business/organisation employing them.

On Budget day, many raced to social media under the presumption that IR35 is now officially dead.

That presumption is misguided; for now, the current IR35 reforms live on, but from April 2023, the changes will be officially reversed, with the original legislation coming back into play.

Simply put, post-April 2023, IR35 will continue, but the responsibility of determining the employment status will revert back to the contractor as it did in the past.

What led to the IR35 reforms being scrapped?

Ultimately, the IR35 reforms faced severe backlash, with campaigns such as Stop The Off-Payroll Tax arising to try combat the change.

As the reforms toughened HMRC’s stance on off-payroll working eligibility and placed responsibility on businesses, it’s no surprise that people were unhappy as, for many, it ultimately boiled down to more paperwork and potential tax penalties if they got it wrong.

What comes next?

For now, the best advice we can give is to carry on as normal but begin thinking about a transition plan prior to the proposed reversal in April 2023.

In the meantime, you can see what else was announced in the mini Budget here, and also keep an eye on our blog page as we’ll be sure to cover any new details as they arise.

Alternatively, if you’re looking for handy payroll software and solutions that can help simplify all of your responsibilities, click here.