IR35 changes again. How does it affect you?

This article is out of date

This article was published after Kwasi Kwarteng's "mini-budget" on 23rd September 2022. We have since published an updated version after Jeremy Hunt's announcement on 17th October 2022.

What changes were announced?

On Friday, 23 September 2022, the new Chancellor, Kwasi Kwarteng, announced that he intends to repeal the Off-payroll working reforms from April 2023.

The Off-Payroll working rules, introduced in the public sector in 2017, were labelled as "IR35 Reform". They were then extended to the private sector in 2021. These reforms made most businesses responsible for their contractors’ IR35 status and associated taxes.

Contractors: What will the planned changes mean for you?

Firstly: IR35 is not being cancelled. The planned changes mean that contractors will be responsible for determining their IR35 status, and calculating and paying the correct tax. They will also be liable for the tax risk of non-compliance.

Contractors will need an IR35 assessment service to determine and demonstrate status to HMRC, and potentially their clients and/or agencies. A Tax Investigation Service will further mitigate the risk to the contractor when the legislation points back to them.

IR35 Shield provides a comprehensive, impartial solution for contractors. Our membership includes unlimited IR35 assessments, discounted contract reviews and a Tax Investigation Service (offering defence by our specialist team and £125,000 of cover in the event of an investigation).

Hiring firms: What do the planned changes mean for you?

The reforms are planned to be repealed in April 2023. If you have a compliance process in place, you need to continue as if nothing has changed. If you do not have a compliance process in place, it’s not too late to get a free consultation with us about how to set this up, or where your risk may lie.

Any open investigations into non-compliance of Off-Payroll will continue. In the next few years, HMRC will likely open new investigations into engagements that took place during the time the legislation applied. You will need to be able to demonstrate your compliance with supporting evidence for up to at least six years.

Finally, it’s important to remember that IR35 is not being cancelled. If and when the reforms are repealed, the old rules return and contractors will be responsible for assessing their IR35 status, and calculating and paying the correct tax. If you want to help and support your contingent workforce to remain compliant, you can point them to IR35 Shield's contractor membership product.

What are your next steps?

These changes to the Off-payroll rules are currently published intent but not in the statute. The next Finance Bill will need to be drafted, laid before the house for First Reading, and then travel through Parliament in the usual way.

Initial drafts for an Autumn Bill are likely to be seen around the start of November, with it reaching royal assent sometime in February 2023.

If you’re a client of IR35 Shield please contact your Account Manager to discuss the changes in more detail.

If you’re a contractor, please visit our membership page for information.

Related articles: https://www.ir35shield.co.uk/Articles/Article/ir35-changes-cancelled-how-does-the-latest-announcement-affect-you