The IR35 off-payroll legislation have revealed it would be repealed in last September's statement, but only a month later the decision was reversed by the newly appointed chancellor, Jeremy Hunt. The government must decide what its priorities are for the future, with the issues around inflation, energy prices, Ukraine, and the upcoming general election, adds Ben-Nathan.
The 2017 and 2021 reforms to the off payroll working rules - also known as IR35 - were a tax law that required the end client, and not the contractors they hire, to decide if the working relationship resembles a self-employed engagement or employment. Under existing rules, the fee-paying party (either the end client or recruitment agency) shoulderd the liability. The aim of the reform was to stop the promotion and misselling of disguised remuneration schemes, however the legislation has received criticism. With the additional £1.8bn in tax revenue, according to HMRC’s latest report, the government would be unlikely to sacrifice this tax generator because of the apparent “tax leakage” that occurred before its inception.
The changes will mean workers will once again be responsible for determining their employment status and paying the appropriate amount of tax and national insurance contributions. This will free up time and money for businesses that engage contractors which the chancellor said could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.
The Chancellor, Jeremy Hunt, will make the Spring Budget announcement on March 15.
