An IR35 update following the mini-budget

Following the Chancellor’s announcement on Friday 23rd September that the Government will “simplify the IR35 rules” and “repeal the 2017 and 2021 reforms” we have received questions from both our PSC and umbrella customers about what this actually means. There are already incorrect interpretations/rumours being circulated which we hope to clear up in this article by answering the questions we have been asked.

Has IR35 been repealed?

No. This misconception seems to have gained traction on contractor forums. The IR35 rules (ITEPA 2003, Part 2, Chapter 8) will not be repealed.

What rules was the Chancellor referring to?

He was referring to the off-payroll working rules (ITEPA 2003, Part 2, chapter 10), which came into effect on 6 April 2017 for the public sector and from 6 April 2021 for large businesses in the private sector. These rules made it the client’s responsibility to determine whether a role was “inside IR35” with liability for clients if they did not take reasonable care in making the determination. This responsibility will pass back to the contractor and his personal service company (PSC) once the legislation is repealed.

When will changes take place?

The Chancellor said from April 2023 but this has to go through and be approved by Parliament. There is no doubt that HMRC will be dismayed by this announcement and will petition for a U-turn. Whilst the proposed change seems likely it is not certain.

Will the IR35 tests change?

No. The basic tests will remain the same.  Whether someone is “caught” by the IR35 rules will depend on a number of factors including the level of integration into the client’s organisation and the degree of supervision and control he/she is under. This is a complex area which continues to evolve as new cases are heard. HMRC has recently focussed on TV/Radio presenters with varying degrees of success which shows how difficult making a determination can be. Anyone wanting to review their IR35 status can speak to PayStream’s expert IR35 team. For PayStream’s accountancy clients this service is free.

There is a possibility (though we have not heard anything yet) that HMRC will petition Government to change the IR35 rules to make them easier to enforce against PSCs (and contractors) since prior to the off-payroll rules HMRC had very limited success in this regard.

If you'd like further advice on this topic, you can contact PayStream’s team of IR35 experts. They are on are on hand to provide practical, clear and tailored advice based on your individual circumstances. Get in touch today by emailing ir35@paystream.co.uk.