Chancellor scraps majority of mini-Budget, including plans to reverse IR35 reform
The new Chancellor, Jeremy Hunt, has confirmed that the off-payroll working rules will remain in place, as last month’s mini-Budget was all but cancelled.
In a statement made on Monday 17th October, Hunt said that the changes, introduced in the public sector in 2017 and private sector in 2021, will not be reversed – as was initially announced by his predecessor, Kwasi Kwarteng.
The U-turn on the IR35 reform repeal was just one of many. Having last week reversed the decision to scrap the incoming Corporation Tax rise next April last Friday, the government will now also keep the basic rate of income tax at 20p indefinitely (rather than cutting it to 19p). This follows a U-turn on the abolition of the 45% additional rate of income tax, which was announced last week.
One of the few changes from the mini-Budget not to be reversed is the 1.25% point reduction in National Insurance Contributions. However, the planned dividend taxation cut – also amounting to 1.25% percentage points – will not go ahead next April.
As a result of this latest development on IR35, contractors’ clients will remain responsible for determining IR35 status and the fee-paying party will keep the liability. The only scenario in which a contractor assesses their own IR35 status is when they are engaged by a company which meets the government’s criteria for ‘small’.
Government labelled “utterly spineless”
This move has been widely criticised by IR35 experts across the board, with IPSE’s director of policy, Andy Chamberlain, describing it as “utterly spineless”.
In reaction, he tweeted that “the government is well aware of the problems caused (by) IR35 reforms – the previous Chancellor said so at the mini-Budget and the Prime Minister made it clear during her leadership campaign”.
He added: “It is clear the Chancellor had to do something to reassure markets but IR35 reforms repeal could and should have been separated out. It was a good decision by Kwasi Kwarteng, even if the rest of the mini-Budget was reckless.”
IPSE’s official statement described it as a “huge blow” to contractors and businesses engaging independent workers.
The anti-IR35 lobbying body alluded to businesses looking forward to an era of less complexity and less cost, and said: “The supposedly pro-business Conservative government has sent out a clear message today – it does not support people who work for themselves.”
Tories have “kissed goodbye” to contractor votes
Echoing Chamberlain’s position was Dave Chaplin, CEO of IR35 compliance firm, IR35 Shield.
He said the repeal of reform “would have been a significant step forward for the UK’s army of self-employed people who are critical to the Governments’ pro-growth agenda. Instead, Off-payroll will continue to cause significant harm to the self-employed, major businesses, the government, and the economy.
Chaplin concluded by saying that the Conservative Party has “thrown half of the genuinely self-employed contractors under the bus and likely kissed goodbye to their success at the next General Election.”