UK Government reverses decision to repeal IR35 reforms

IR35 update: The new Chancellor of the Exchequer, Jeremy Hunt, today confirmed that plans to repeal reforms to the IR35 rules have now been withdrawn.

The IR35 rules are aimed at individuals who operate through an intermediary or personal service company to provide services to an end business user who, but for the intermediary company, would otherwise be deemed to be full-time employees. HMRC describes these workers as ‘disguised employees’ as they can enjoy the same rights and benefits as full-time employees but can pay considerably less tax.

The IR35 legislation was introduced to address tax avoidance by personal service companies. Reforms to the IR35 rules introduced in April 2021 meant that liability for assessing IR35 status for tax purposes rested with the end business organisation. These reforms were widely regarded as controversial as they were perceived by many to create additional obstacles with the engagement of self-employed contractors.

Last month, as part of the Government’s ‘Mini-Budget’, it was announced that the unpopular reforms would be abolished in attempt to simplify matters and to encourage parties to engage more freely in such contracting arrangements. However, Jeremy Hunt has now reversed this decision. This means that the IR35 reforms of 2021 will now remain in place.

Employment solicitor Lisa Moore commented:

The liability for assessing IR35 status for tax purposes will stay with the end business organisation going forwards. This will come as a disappointment to many businesses and self-employed contractors alike who have found these reforms to be unnecessarily complex and time consuming to navigate.

It is important to remain compliant with the current legislation. If you are unsure about the employment status of the people who work for you or with you, you should seek legal advice from a experienced Employment Lawyer.