In a blow to the recruitment sector, contractors and end-clients alike, the IR35 Reform U-Turn has been incredibly disappointing news.
Kwasi Kwarteng, the former Chancellor, declared the IR35 off-payroll reform would be repealed a few short weeks ago, which was one of Liz Truss’s flagship economic measures in her campaign to become the next Prime Minister of the UK.
However, this week, the newly appointed Chancellor, Jeremy Hunt announced that the planned IR35 Off Payroll Rules repeal will no longer take place. This was announced along with many other reversals of Kwasi Kwarteng’s mini budget in an effort to stabilise the economy after the pound dropped to its lowest value against the US dollar and sent the market into a volatile state.
Contractors, who felt they had been unfairly treated since the Reform took place in 2021 were looking forward to a change in the rules, as this would mean many clients would reverse their blanket bans on contractors which would increase the contract opportunities in the market and would allow them to determine their own status again.
Whilst IR35 is burdensome on businesses, many recruitment companies and clients are pleased that nothing is changing, as many had spent a lot of time and money putting robust and compliant measures in place to ensure they sufficiently complied with the off-payroll rules brought in in 2021 and means that there is no need to spend more time and money reviewing their processes once again.
In more news over the past few days, Truss has stepped down as Prime Minister, and it has been announced that Rishi Sunak is now Prime Minister of the United Kingdom. With his new appointment, it is uncertain whether Jeremy Hunt will remain as Chancellor, however it is increasingly unlikely there will be any further amendments to IR35 with Mr Sunak as PM, however it is hoped that his appointment will stabilise the markets and economy.
So, what does this mean?
Business must stay compliant with the current rules! Recruitment businesses and end clients must continue to make Status Determination Statements in the same way they have since April 2021 when engaging with contractors. The only positive from this quick turnaround is that hopefully companies had maintained their compliance processes and had made no significant changes.
It is hoped that with this U-turn, the treasury will be able to review the complex test used when determining a contractors IR35 status, and the rules would be simplified to reduce uncertainty and the compliance burden on businesses when applying the rules. However, a review has been promised on many occasions, so we don’t expect this anytime soon.
If you are a client, or contractor, and need help with this, please contact us today and we will be able to talk you through the latest update from the government, and why it is more important than ever to remain compliant and met the HMRC guidelines.