Changes to IR35 ‘off payroll working’ rules
In the Chancellor’s ‘plan for growth’, he announced changes to IR35 or ‘off payroll working’ rules. The rules were originally brought in in an attempt to stop contractors using personal service companies to pay less tax than they would have done as employees. HMRC called it disguised employment. This article will explain the changes and what they might mean for you.
What is IR35?
IR35 is the name of a document issued by HMRC regarding ‘disguised employment. The name stuck long after the paper had been published. New off payroll working rules were implemented for the public sector (a significant user of limited company contractors) in 2017. The rules were extended to apply to medium and large companies in the private sector in 2021.
What are the new rules for April 2023?
The chancellor announced the repeal of the 2017 and 2021 changes to IR35, but this does not mean IR35 is being scrapped. This places the responsibility for the determination of IR35 and the tax liability, back with the contractor and away from the end client.
In the growth plan the government stated
“The 2017 and 2021 reforms to the off payroll working rules (also known as IR35) will be repealed from 6 April 2023.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”.
When will the changes 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.
IR35 is NOT being scrapped
IR35 is not being scrapped. After the changes go live in April 2023, IR35 will still be applicable. The fundamental rules of IR35 are the same. What has changed is that the determination of employment status moving away from clients and back to the contractor or limited company.
If you have any questions regarding your status under IR35 please get in touch with your Swindells’ partner who will be able to advise you further.
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