Surprising U-Turn on IR35

Those working in the contracting world were pleasantly surprised to hear the announcement from the Chancellor of the Exchequer, Kwasi Kwarteng, as he announced that IR35 would be repealed on Friday, 23rd September, in his “mini-budget”. The changes form part of the UK government’s ‘Growth Plan 2022′ with the intent of introducing the changes from 6th April 2023.

The original changes to IR35 came into force in 2017, affecting the public sector and, last year, the private sector, forcing more workers to be employed, raising a further £1 billion-plus in revenue. By reversing the decision, the Government hope to promote economic growth in many sectors, including construction.

This is welcome news for contract workers and will take the onus off the corporation (end-client) to determine status. The original Onshore Intermediary Legislation will remain, requesting that the intermediary company qualify if the respective worker is supervised, directed and/or controlled. For compliance, those paying the subcontractor must still check that the worker can work independently.

Corporations will still be held by the Criminal Finances Act 2017, which obliges companies to take reasonable steps to prevent the facilitation of tax evasion in their supply chains.

In some cases, end-users may continue with the blanket ban informed on PSCs and self-employed workers. However, they risk losing out on some of the best talent who will likely insist on returning to self-employment, where they can operate as tax efficiently as possible.

Regardless of the changes, sub-contract workers will still be scrutinised for their status, and the liabilities for taking on self-employed workers will be placed on the intermediary/supplier.

The repeal of the Off-payroll rules is 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. Until then, Off-payroll is still binding law. Nothing is guaranteed until it gets Royal Assent.

What are the options moving forward?

IR35 rules will not be scrapped altogether, and individual contract workers, staffing firms and intermediaries will still need to observe the Onshore Intermediaries legislation (2014), which determines the worker’s control and the original laws such as the right of substitution.

Those operating ‘outside’ of IR35 can access Futurelink Group’s specialist self-employed payment options, which include a Gross Payment solution for sole traders, Limited Companies for SMEs, and for those working in the Construction Industry, a CIS compliant solution where traditionally 20% is deducted from the worker. Workers must show evidence that they are registered with HMRC and provide their UTR number.

Those operating inside IR35 would be advised to contract under Futurelink’s PAYE umbrella or PAYE hybrid solutions. Both deduct tax and National Insurance at source and manage holiday and sick pay. The worker does not need to complete an annual self-assessment or tax return unless they earn income elsewhere.

If you want to know more about Futurelink Group’s fully compliant payment solutions, please either call 01923 277900 or email sales@futurelinkgroup.co.uk

For any other advice please feel free to contact us.