ir35 reform scrapped

IR35 reform scrapped on an unprecedented day of tax cuts 

Chancellor Kwasi Kwarteng repeals off-payroll working rules, alongside a raft of additional measures to boost the economy

Speaking in Parliament during the emergency mini-budget today (Friday 23rd September), Chancellor of the Exchequer, Kwasi Kwarteng, sensationally announced IR35 reform will be repealed.

Kwarteng spoke about the need for “tax simplification”, going on to say that “we can also simplify the IR35 rules – and we will”.

“In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses,” he continued.

“So… we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review,” he added.

The news will be widely welcomed by contractors, thousands of whom had been left with no option but to work on the payroll, as businesses took a risk averse approach to the changes.

This development will mean, from April 2023, contractors will once again be responsible for determining their IR35 status and, in turn, liable for these status decisions. 

 

Campaign groups celebrate end of flawed reform

“IR35 lobby body, IPSE, which was formed in response to the introduction of IR35 in 2000, was “delighted” by the news.

Andy Chamberlain, IPSE director of policy, tweeted a brief response shortly after the Chancellor broke the news:

“IPSE has vociferously and consistently campaigned against the IR35 reforms. We are delighted they are to be scrapped”.

Highlighting that the “underlying rules still need to be addressed”, Chamberlain called the move “very welcome”.

The surprise announcement follows Liz Truss’s promise to launch a review into the IR35 rules during her campaign to become the new Prime Minister. 

 

Corporation Tax increase cancelled

The repeal of IR35 reform forms part of a broad and wide-ranging programme of tax cuts unveiled by the Chancellor in the mini-budget. Such is the array of cuts, the Institute for Fiscal Studies called it the biggest tax-cutting event since 1972.

Commending the “entrepreneurial drive” of workers across the country, Kwarteng highlighted the challenges that businesses face and the “many barriers to enterprise”.

The Chancellor continued, saying “we believe that high taxes reduce incentives to work, they deter investment and they hinder enterprise”, and promised a wider review of the tax system to make it simpler and “more dynamic”.

The first step was to cancel the planned increase to Corporation Tax, which was due to take effect in April 2023. It will remain at its current level of 19% rather than increasing to 25%.

Kwarteng said that the move was worth £19bn a year to the economy, “for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions”.

Other mini Budget highlights impacting contractors and self-employed workers include:

  • Reversing the recent increase in national insurance (from November 2022)
  • Scrapping this year’s dividend tax rise of 1.25 percentage points (April 2023)
  • A cut in the basic rate of income tax (to 19%) from April 2023
  • One single higher rate of income tax (40%) from April 2023

3 Comments

  • XY says:

    A good start but the suggestion that they will be “simplifying” IR35 in future could be good or bad – repeal would be better (and simpler!).

    Or… increase teh Employment Allwance to around £250,000 so that only the bigger firms pay it – the ones that can shift their profits around the world.

    It also makes no sense to tax jobs on companies that are not ( or may not) be successful, unlike taxing profits which only taxes successful companies. Setting up a call centre in India avoids NI altogether because employers NI is only taxing British-based jobs.

    Empoyers NI is a terrible idea in so many ways.

  • hojo says:

    Woohoo we’re back to where we started. I can’t wait to see how contractors will yet again get shafted when the rules are “simplified”. Repeal the whole damn thing. No one understands how it works anyway, not even HMRC.

  • Man says:

    Best news in years!

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