How will IR35 change from April 2023?
UPDATE: On 17th October the government reversed its decision to repeal the IR35 reforms. Therefore will no longer be any changes to IR35 from April 2023.
In the Mini-Budget of September 2022, the UK government announced fundamental changes to IR35, repealing the previous IR35 reforms. Find out everything we know about the changes so far below.
What are the changes to IR35 announced in September 2022?
The chancellor announced the repeal of the 2017 and 2021 changes to IR35. This places the responsibility for the determination of IR35 and the tax liability, back with the contractor and away from the end client.
When will the changes to IR35 take place?
The IR35 changes announced in the September Mini-Budget go live in April 2023. The current, Chapter 10 rules will remain in place until April 5th 2023 and any work done up to that date, even if invoiced and paid after April 6th 2023, is subject to the client determining the status.
What did the government actually say regarding repealing IR35 reforms?
The government published a “Growth Plan”. In the Growth Plan, they stated the following:
“The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers providing their services via an intermediary 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 that 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”.
Why did the government repeal the IR35 reforms?
During the Conservative leadership campaign, Liz Truss mentioned that she would review IR35 insisting that the tax system should not treat contractors the same as big business. This was met with wide cynicism in the contracting community given the amount of engagement to date and the “justification” for making the changes historically by HMRC and previous government ministers. Nobody in the industry expected the IR35 reforms to be repealed so suddenly. This move by Liz Truss was part of allowing contractors and business to focus on growth, a flexible economy and new investment without the constraints of the IR35 reforms.
Is IR35 being scrapped? Or is IR35 still applicable in 2023?
IR35 is not being scrapped. After the changes go live in April 2023, IR35 will still very much be applicable. The fundamental rules of IR35 are the same – what has changed is the determination of employment status moving away from clients and back to the contractor or limited company. Businesses will revert back to the IR35 rules that were in place from 2001 until 2017 in the public sector and 2021 in the private sector.
Will Status Determination Statements be required of contractors from April 6th 2023?
No, they will not. An HMRC spokesperson told ContractorUK: “Contractors will not be required to produce a Status Determination Statement to comply with the off-payroll working rules from April next year.”
So, there will be no statutory requirement for PSCs to produce an SDS from April 6th 2023, at which point the current requirement for clients to produce the statements will end too.
Further financial implications to contractors form the mini budget can be read here
More information on IR35 can be found here: IR35 information
Do you need your contract reviewed for IR35? IR35 contract reviews
Do you need IR35 insurance? IR35 insurance