|The reforms to the off-payroll working rules (IR35) made hiring organisations responsible for determining the tax status of contractors. The reforms were heavily criticised as they resulted in huge complexity for business and widespread concerns that status determinations were being made incorrectly.
The IR35 rules, which affect many freelancers and contractors, will be simplified, with reforms introduced in 2017 and 2021 being scrapped completely. From April, workers across the UK will be responsible for setting their employment status and ensuring they pay the appropriate amount of tax and national insurance contributions.
The controversial changes had put this burden on the 'end client' – the business or recruitment agency through which the freelancer or contractor was hired – and had met with wide-spread condemnation about the principle and the practicality of operating the system.
In a mini-Budget branded as 'The Growth Plan' Chancellor Kwasi Kwarteng outlined how he believed that scrapping the IR35 off-payroll measures will make it easier for companies to hire new staff.
In the post-Budget documentation, it said:
- "3.44 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 The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023.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. This will free up time and money for businesses that engage contractors, that could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules."
Freelancer group, IPSE, praised that announcement that that the 2017 and 2021 reforms to IR35 are set to be scrapped from April 2023 and described it as a 'watershed' member.
Andy Chamberlain from IPSE said: “We are delighted that the new Chancellor agrees with what we have been saying for years – that the 2017 and 2021 reforms create unnecessary complexity for contractors and businesses. It is with huge relief that we welcome this dramatic shift in government thinking.
“As delighted as we are with the news, we remain concerned that the underlying IR35 rules will stay in place, and we hope to work with the Government to make further progress on this issue in the weeks and months ahead.
“But for now, this is a watershed moment and will be a tremendous boost to thousands of contractors who have been unfairly penalised by these damaging rules.”
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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