IR35 repeal U-turn: IR35 expert Danny Batey shares his thoughts
There are many who lobbied hard against the April 2021 off-payroll working reforms, including medium and large-sized businesses who didn’t want the IR35 decision-making burden and contractors who had lost control over their own tax affairs.
Despite catching the contractor market by complete surprise, we can see that reducing red tape would have fitted into the Truss Government’s growth agenda and this perhaps explains the repeal of the off-payroll reforms in the mini-budget on September 23rd.
However, such was the controversy of that mini-budget, Chancellor Kwasi Kwarteng was dismissed after just 38 days in the role. In a bid to rectify the damage caused, the new chancellor, Jeremy Hunt, announced a U-turn on key sections of the budget – including the decision to repeal the off-payroll working rules.
What does the IR35 repeal U-turn mean for contractors?
IR35 Expert and Senior Tax Consultant at Markel Tax, Danny Batey, shares his thought on the recently announced U-turn:
“Since the ex-chancellor’s unexpected ‘mini-budget’ announcement last month that the off-payroll working rules were to be repealed from April 2023, the dust had very little time to settle, with many in the contractor space still coming to terms with the news.
Evidently a lot can happen in the space of a few weeks, and last week’s announcement by Jeremy Hunt that the repeal will now not go ahead will bring massive disappointment to many who had cheered the roll back to the ‘old’ IR35 rules under Chapter 8 Part 2 ITEPA 2003.
If we combine this decision with the climb-down on the change to the increase in corporation tax, the reversal of the reduction in dividend tax and income tax, the euphoria for contractors working through their own limited company has been short-lived.
So for now, pending no further bombshell announcements – bearing in mind we now have a new Prime Minister – the public and private sectors will continue to operate under the current Chapter 10 ITEPA 2003 legislation. This means that most end clients will still be responsible for determining the IR35 status for any limited company contractors that they engage, with potential liabilities from incorrect assessments resting with the fee payer.
If any of our clients would like to discuss the announcement further and to establish how they may be affected, our team of IR35 experts are on hand to guide you through and offer advice. Please contact us at IR35@markel.com and a member of the Contractor Solutions team will be in touch.”
IR35 status decision making
Nevertheless, some contractors were neither affected by the initial announcement to repeal or the decision to reverse it. Those contractors working for small businesses have continued to be responsible for determining their own IR35 status.
As currently stands, small businesses are exempt from the IR35 decision-making. To be classed as a small business, the company must meet at least two of these requirements:
- Annual turnover of no more than £10.2 million.
- Balance sheet total of no more than £5.1 million.
- No more than 50 employees
For more information on IR35, visit our help and guidance hub.
About our IR35 expert
Danny’s career began 25 years ago with the National Insurance Contributions Agency as an Assistant Inspector and then with Employer Compliance at HMRC before moving into private practice. For the last 20 years he has been a senior consultant within two leading status consultancies. His specialism is defending clients in HMRC IR35 off-payroll and tax status disputes and Danny has defended hundreds of contractors without losing a case.