IR35 Reforms to be Repealed from April 2023

The government has repealed the IR35 reforms of 2017 and 2021, and this will be effective from April 2023. It is positive news for self-employed contractors, who have suffered a lot from contract bans and ‘umbrella only’ contracts. 

Now that the rules might go back to pre-2017, contractors should be concerned about the lasting ripple effects of these reforms. 

The Announcement 

While delivering the ‘growth plan’ of government to the parliament, Chancellor Kwasi Kwarteng called the reforms of 2017 and 2021 “unnecessary complexity and cost for many businesses.” 

Reforms of 2017 and 2021 

The reforms will be repealed from 6 April 2023; from then onwards, the contractors with limited companies will be responsible for the IR35 status of their engagements. The details on how these reforms will be unpicked in practice are awaited. However, it is possible that the entirety of Chapter 10, Part 1 of ITEPA 2003, might be repealed. 

But the IR35 Rules themselves, Chapter 8 of ITEPA remain as it is, and “HMRC will continue to keep compliance closely under review” as per the Chancellor. 

Inside and outside IR35

Being inside IR35 means your contract falls under the off-payroll working rules, and HMRC considers you an employee for tax-related purposes. 

Being outside IR35 means your contract points towards self-employment, so you can operate tax efficiently. 

What do the changes mean in practice? 

The effects will affect any worker in the UK who provides his services through an intermediary. Now the liability and financial risk will also shift back to the workers. These changes will impact both the public and private sectors. 

The expectation is that by simplifying the regime and removing the time and cost burden from the end user, the focus can shift, and they can prioritize other areas. 

The reforms’ repeal has been received well. According to the press, if the repeal goes ahead, it will free the organizations from the burden of determining workers’ employability status, and genuinely self-employed contractors will no longer be at payroll risk by overly cautious organizations. 

Bottom line

In conclusion, it is hoped that the increased flexibility can re-energize the UK workforce as there will be more vacancies than people to fill them. 

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