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3 Essential things businesses need to know about the scrapping of IR35 reform

3 Essential things businesses need to know about the scrapping of IR35 reform

Chancellor Kwasi Kwarteng followed up the promise by Liz Truss and scrapped IR35 reforms in the mini-budget today.

Here are three things to know about the scrapping of IR35 reform announcement from the Treasury Growth Plan and leading experts:

6th April 2023 is the key date

The Treasury Growth Plan states the following:

The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023.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 across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.

I just talked to our IR35 Partner Qdos CEO Seb Maley who said:

“This will come as a huge relief to contractors, in particular. It’s no secret that many genuinely self-employed contractors have struggled to secure projects outside IR35 since the roll-out of reform”.

“On the whole, it’s positive news for businesses, too – albeit tempered by the fact that they have invested significant resource in preparing for and managing their IR35 compliance in recent years. I should stress, though, that nothing will change until April 2023 – meaning that IR35 compliance must remain a priority”.

IR35 does not just go away

There will be a huge sigh of relief from businesses and contractors but caution is still required.

Penny Simmons from Pinsent Masons said today that:

“Businesses will likely welcome the Chancellor’s announcement that the government will repeal changes to the IR35 rules that have created significant compliance and tax risks for businesses”.

However, that doesn’t necessarily mean it’s the end of the IR35 story – the rules will still exist – it’s just that contractors will once again be responsible for compliance and payment of tax. Businesses will remain exposed to tax risks by virtue of other tax rules and the corporate criminal tax offences – if they pay contractors off-payroll when they know that the contractors should be taxed as employees.

Demand for contractors will increase, but you still need well qualified projects

When the reforms came in we saw massive cuts in contractor hiring in the public sector and financial services.

As permanent hiring freezes come into place as the economy shrinks we will see contractor hiring increase very similar to 2018 after the credit crunch. It is important to ensure you have strong partners and well defined projects for contractors and freelancers to work on and not purely as a replacement for hiring full-time staff.

Our AI SOW creator and matching will become even more crucial to businesses after 6th April 2023 as we are committed to supporting our contractors and freelancers to remain compliant.

Rich Wilson is the CEO of Freelancer Talent Platform Gigged.AI and has over 15 years experience in contingent staffing.

 

Aimee Mcpherson

Author Since: January 31, 2022