The UK government announced substantial revisions to IR35 in the September 2022 Mini-Budget, undoing prior IR35 amendments. Find out what we know so far about the changes below.
What are the changes to IR35 announced in September 2022?
The chancellor announced the revocation of the IR35 modifications made in 2017 and 2021. This shifts the burden of determining IR35 and tax liability back to the contractor and away from the end client.
When will the changes to IR35 take place?
The modifications to IR35 announced in the September Mini-Budget take effect in April 2023. The present Chapter 10 rules will be in effect until April 5, 2023, and any work completed before that date, even if invoiced and paid after April 6, 2023, is subject to the customer choosing the status.
What did the government say about scrapping the IR35 reforms?
The administration unveiled its "Growth Plan." They declared the following in the Growth Plan:
"The off-payroll working rules reforms of 2017 and 2021 (commonly known as IR35) will be repealed on April 6, 2023." Workers who provide their services through an intermediary will be responsible for identifying their employment status and paying the appropriate amount of tax and National Insurance contributions as of this date.
This will free up time and money for businesses that hire contractors, which can then be used for other purposes. The revision also reduces the possibility that real self-employed people may be affected by the underlying off-payroll restrictions."
Why did the government repeal the IR35 reforms?
During the Conservative leadership election campaign, Liz Truss said she would look into IR35, stating that the tax system should not treat contractors like large corporations. Given the level of involvement to date and the "justification" for making the changes historically by HMRC and past government ministers, this was met with much skepticism in the contracting world. Nobody in the sector predicted that the IR35 reforms would be reversed so abruptly. Liz Truss' decision was part of a larger effort to free contractors and businesses to focus on development, a flexible economy, and new investment without the restraints of the IR35 reforms.
Is IR35 being scrapped? Or is IR35 still applicable in 2023?
IR35 is not being phased out. IR35 will still be effective when the modifications go into effect in April 2023. The basic rules of IR35 remain unchanged; what has changed is that the determination of employment status has shifted away from clients and back to the contractor or limited firm. Businesses will revert to the IR35 norms in effect from 2001 to 2017 in the public sector and 2021 in the private sector.