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Joy short lived as plans to scrap IR35 reforms are scrapped
by The Editor at 13:20 17/10/22 (News on IR35)
The Government has been slammed as 'spineless' after its multiple mini-Budget U-turns included the decision to repeal the IR35 reforms.
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In the recent mini-Budget the Government was praised after it announced its intention to scrap the controversial and unpopular off-payroll IR35 reforms of the past few years. The move would have seen the IR35 status compliance burden revert back to contractors from their clients. (See: Mini-Budget: 'Watershed moment' as controversial IR35 reforms are scrapped - Shout99, Sept 2022)).

But contractors joy was short-lived when after a few weeks of economic turmoil, the new Chancellor Jeremy Hunt announced that the Government was scrapping virtually all the proposed tax cuts promosed by his predecessor, Kwasi Kwarteng, less than a month ago.

IPSE - Huge blow
Freelancer group, IPSE, described the move as 'spineless' and accused the Government of reneging on its promises.

Andy Chamberlain from IPSE said: “This announcement will be a huge blow to thousands of self-employed contractors and the businesses they work with. The reforms to IR35 have created a nightmare for businesses seeking to engage talent on a flexible basis, while simultaneously forcing individuals out of business altogether.

“We know that the Government is well aware of the problems caused by this damaging legislation – the previous Chancellor said so at the mini-budget and the Prime Minister made it clear during her leadership campaign. Despite this, it has taken the spineless decision to row back on its promise to repeal the reforms.

"Businesses that were looking forward to an era of less complexity and less cost will have had those hopes dashed. Our fear is this decision will lead to yet more work being off-shored to other territories and more people being forced to work through unregulated umbrella companies. The supposedly pro-business Conservative Government has sent out a clear message – it does not support people who work for themselves.”

FCSA - Disappointed
The trade body for the employment services sector, the Freelancer and Contractor Services Association expressed its disappointment that the proposed rollback of off-payroll working rules has been scrapped by the Chancellor.

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Chris Bryce from FCSA said: “The scrapping of the rollback of the 2017 and 2021 IR35 rules is disappointing. This will add to the confusion in the contractor marketplace and will also do nothing to improve the agility and flexibility contractors offer UK plc.

"However, the Chancellor also recognised that re-introducing the 10 per cent rise in National Insurance Contributions dropped by his predecessor, would have been a step too far and, since that tax would have disproportionately affected those working via umbrella companies, I’m pleased that it currently remains off Jeremy Hunt’s agenda.”

Also dropped – and it would seem indefinitely – was the reduction of basic rate income tax from 20 per cent to 19 per cent with even the Chancellor of several Chancellors ago, Rishi Sunak’s target date of April 2024 now off the table.

Mr Bryce said: “The Government realistically had little choice but to dance the Hokey Cokey on Kwasi Kwarteng’s so-called mini-budget. Markets and businesses react badly to uncertainty and steeper borrowing, and I hope that a steadier hand on the tiller will give both the markets and our industry some stability in the medium term. What is clear is that Liz Truss’ economic views have been supplanted by Hunt’s and the immediate market reaction indicates that it’s unlikely she’ll be able to credibly speak on fiscal policy for quite a while, if ever.”

Other measures

  • Planned 1p cut in basic rate of income tax put on hold indefinitely - rate will remain at 20 per cent;
  • Energy price guarantee will no longer last two years - it will last until April 2023 and then be reviewed;
  • VAT-free shopping for visitors and alcohol duty freeze both scrapped
  • Cuts to National Insurance and Stamp Duty remain in place.
  • Plans to stop corporation tax from rising next April have already been scrapped in an earlier U-turn. The corporation tax rate will go up from 19 per cent to 25 per cent in April 2023 after all.

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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