What do the recent IR35 changes mean for your company?

What do IR35 changes mean for your company?

As I am sure you are aware, according to the recent mini-budget, the IR35 reform will be repealed from 6th April 2023.

This means from April, workers who provide their services via an intermediary, are to regain sole responsibility for determining their employment status and paying the appropriate amount of tax and national insurance contributions under the IR35 rules.

The Chancellor, Kwasi Kwarteng has repealed these reforms as part of the first steps in taking complexity out of the tax system.

He said: “To achieve a simpler system, I will start by removing unnecessary costs for business. 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.”

This change will be welcomed by businesses wishing to hire on an interim basis, who have struggled to grapple with hiring requirements, particularly at a time when labour supply chains are already under pressure as a result of the pandemic and talent shortage.

Excellent senior level candidates often refuse to work inside of the IR35 regulations, which means huge missed opportunities and potential limited business growth – one of the many reasons that businesses will be feeling relief after this news.

It is also worth noting that businesses should also benefit in terms of actual hiring costs. In many instances, the current IR35 regime resulted in employers offering substantially larger day rates to attract top talent than prior to IR35 being implemented.

For senior level interim contractors, who often prefer to hire out their skills to a variety of different firms and not just one main employer, the scrapping of IR35, is expected to have a dramatic and positive impact.

The Recruitment and Employment Federation welcomed the announcement, and CEO Neil Carberry said: “Putting business at the heart of delivering prosperity for the UK is always the right call, and the Chancellor’s focus on this will have landed well with employers all over the country.

“Ditching the botched changes to IR35 – the rules on how temporary contractors are paid – is a huge help.”

It is important to remember however, that from April the repeal of the 2017 and 2021 doesn’t exactly abolish IR35 entirely but takes us back to the rules in place from 2000.

What happens between now and April 2023?

It should also be noted that for services provided before 6th April 2023, the current rules will still apply, even where the payment is made on or after 6 April 2023.  Therefore, employers must continue to comply with the current rules of the IR35 legislation but should begin to put a transition plan in place.

Norrie Johnston, NJR Chairman said: “Although investing a significant amount of time and money on implementing complicated compliance, overall our clients have displayed huge relief from the news that the government plans to scrap the IR35 legislation.

“It removes the burden of the never ending and difficult to manage compliance risk from the many businesses wishing to hire on an interim basis.

“No doubt this will also help to unlock businesses growth potential and utilise the excellent talent of senior level interim contractors – especially needed in the post pandemic era”.