IR35 not to be repealed after all
Last month we reported on the reforms to IR35 in the Government’s “mini-budget” where it was announced that the IR35 reforms introduced in 2017 and 2021, referred to as the “Off-Payroll Rules,” will be repealed with effect from 6 April 2023.
On 17 October 2022, with a new Chancellor came a U-turn from the Government, and the IR35 reforms were among others that were affected. Likewise, plans to scrap the off-payroll working rules from April 2023 were similarly revoked.
Businesses will therefore continue to be required to comply with the IR35 rules and determine the correct tax status of an individual contractor, paying tax and NI where required.
End Users of freelancers providing their services through their own personal service companies, “Limited Company Contractors”, will have to continue to bear the costly and time consuming burden of:
1) deciding whether their engagement falls within the remit of these rules,
2) carrying out any employment status check in respect of them as if the rules did apply, which included notifying the Limited Company Contractor of the results of their deliberations (dealing with any appeal then arising).
Businesses should continue to be careful in respect of engaging Limited Company Contractors and it would be prudent to consider what arrangements have been made during October 2022 and ensure that anyone who was previously deemed to be employed under these rules who will now be caught again by them has the correct rules applied to them, as well as being mindful that artificial arrangements aimed at limiting tax liabilities, and a failure to take reasonable steps to prevent tax evasion, may give rise to criminal liability.
Businesses should continue to keep under review the use of Limited Company Contractors in their supply chain and ensure contract documentation for the engagement of Limited Company Contractors is properly drafted, consistent with their engagement as independent contractors and not working under the direction and control of clients.
Posted on 4 November, 2022 by Ortolan