IR35 Scrapped – Mini Budget 2022 -A News for Self-Employed Workers
The Chancellor has committed to repealing the Off-payroll legislation today in the mini budget, which was supposed to reform IR35, but instead held businesses back. The IR35 Reforms, which rolled into the public and private sectors in 2017 and 2021, respectively, will no longer apply from April 2023. Instead, the original rules will remain, and contractors will be responsible for assessing their taxes.
The Chancellor stated in his mini-Budget that workers, rather than businesses or government agencies, would be responsible for determining their employment status.
Self-employed workers who provide services through their own businesses will now be required to pay the appropriate tax and national insurance contributions.
Commenting on the move, Dave Chaplin, CEO of IR35 Shield, said:
“Today, contractors and businesses will be celebrating as Liz Truss and her government have not only kept to their promise but gone further and repealed a legislation that has had a damaging effect on business and contractors’ livelihoods for the past five years.
He further stated “The new version of IR35 has simply served to pour glue on the economy and prevent growth. The Chancellor has done the right thing and removed an unnecessary burden for firms of trying to solve a complex riddle every time they hire a worker. Today’s bold move by Kwasi Kwarteng may well have given the Conservatives a chance of winning the next elections.”
“The ‘off-payroll’ rules are contained within Section 10 of the ITEPA 2003, whereas the original IR35 rules are incorporated into Section 8. Section 10 is to be scrapped; Section 8 will remain.”
This is a piece of great news for businesses and should revitalize the industry’s contracting market following several dreadful years.
Now, we will have to wait to see more detail on how the current rules will be untangled, and how ‘IR35’ is be administered from April 2023 onwards.
What is IR35?
HMRC implemented IR35 in 1999. The goal was to crack down on individuals who worked similarly to employees but under the guise of a limited company.
Freelancers who work through a private company pay less income tax and do not have to pay national insurance.
Originally, it was up to individuals to determine whether they were subject to IR35. However, following reforms in 2017 and 2021, the onus has shifted to businesses and governments to determine the status of their contractors.
The rules apply when a worker provides services to a client through an intermediary but is classified as an employee if contracted directly.
These rules may apply to you if you are:
- A worker who offers their services via an intermediary (typically their own private company);
- A client who obtains services from a worker via an intermediary;
- A company that provides workers’ services through an intermediary.
Income tax and employee national insurance contributions must be deducted from fees and paid to HMRC if the rules apply. Employer contributions to national insurance must also be paid.
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