IR35 reform repeal U-turn: what businesses need to know

IR35, Off Payroll Reform

The off-payroll working rules will remain in place in the public and private sectors

Just weeks after it was revealed in the mini-Budget that IR35 reform would be repealed, the government has U-turned on its decision. 

The newly appointed Chancellor, Jeremy Hunt, tore up the vast majority of last month’s fiscal statement, announcing that nearly all of the tax cuts and changes unveiled in the so-called mini-Budget would be reversed. 

This included the promise made by Hunt’s predecessor, Kwasi Kwarteng, to reverse IR35 reform, which was introduced in the public sector in 2017 and the private sector in 2021. 

However, in a brief statement, the new Chancellor said: “We are not continuing with the reversal of (the) off-payroll working rules”.

Read on to find out what the scrapping of the IR35 reform repeal means for businesses. 

 

What is happening?

After the new Chancellor’s intervention, nothing. 

The off-payroll working rules aren’t going anywhere. IR35 reform will remain in play in both the public and private sectors. 

It means public sector organisations and medium and large businesses in the private sector are responsible for assessing the IR35 status of contractors they engage. 

Alongside this, fee-paying parties (often the recruitment agency when involved) are liable for mistakes. 

 

Was this the right decision?

Contractors, recruitment agencies and businesses engaging these workers have each, in their own way, experienced challenges with IR35 – it has, in truth impacted the flexibility of the UK’s labour market. 

So the latest twist in the story of IR35 is a controversial one, unlikely to win the new Chancellor 

much support from the parties affected by the off-payroll working rules. 

 

What should businesses do?

Businesses – whether agencies or end-clients – must continue managing IR35.  

Many firms had started to plan for the now-reversed repeal of IR35 reform. However, given this wouldn’t have seen IR35 responsibility and liability transfer back to the contractor until next April, businesses should have kept their IR35 processes in place. 

With this in mind – and working on the basis that a business has compliant IR35 processes up and running– there is no change of course needed. 

 

How can businesses ensure IR35 compliance?

The government’s IR35 U-turn means businesses must prioritise their compliance, which expands beyond simply making accurate IR35 status determinations. 

At a high level, this consists of (but certainly isn’t limited to):

  • Carrying out IR35 status decisions with reasonable care
  • Issuing Status Determination Statements (SDS) to contractors 
  • Ensuring compliant payroll processes are in place for contractors deemed inside IR35
  • Avoiding blanket IR35 determinations 

For more information and to hear how Qdos can help support IR35 compliance with award-winning services, please contact your Qdos Account Manager or our team on 0116 269 0992 or info@qdoscommercialservices.com.

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