In the September “mini budget” the new Chancellor, Kwasi Kwarteng, revealed what can only be described as a ‘bombshell out of nowhere, unforeseen by industry experts, the Government’s intention to repeal the Off-payroll Working Rules (Off-payroll) from April 2023. Mr Kwarteng said the government can “simplify the IR35 rules” and revealed that the existing rules were to be scrapped in both the public and private sectors.

A review of IR35 was promised by Liz Truss during the Conservative leadership hustings; however, it must be true to say that few people would have foreseen the proposed repeal of the Off-payroll rules coming, not least as it is quite unheard of for a Chancellor to repeal Primary tax legislation without consultation. There were a number of misunderstandings, initially with reports on social media saying that “IR35 is dead” which is fundamentally incorrect as IR35 is to remain in place.

It is important to understand that the repeal of Off-payroll is currently a published intent and not in the statute. The next Finance Bill will need to be drafted, laid before the house for First Reading, and then go through Parliament in the usual way. Initial drafts for an Autumn Bill are likely to be seen around the start of November, with it reaching Royal Assent sometime in February 2023. Until then, Off-payroll is still binding law and nothing is guaranteed until it reaches Royal Assent.

However, if the reforms do go through it means that the responsibility for determining IR35 status shifts back from the end client to the limited company contractors. Contractors will once again assess their own IR35 status and will be liable for non-compliance, rather than the end client.

The rules were forced upon businesses, effective April 2021, despite being told by the overwhelming majority of IR35 stakeholders that it was a short-sighted and a potentially disastrous decision. For those who have implemented the reforms compliantly they have invested a considerable amount of time and resource in this ‘project.’ There will be hurdles to overcome – businesses should reverse any blanket IR35 determinations and contractor bans and considerations may be needed for contractors currently engaged inside IR35 or working via umbrella companies. Commercial negotiations will be required between the various parties, ie the employment business, agency and the end-client which may result in the need to reissue contracts with the new terms.

HMRC has not said whether it has guidance available for clients, agencies and contractors who may have to undo processes and procedures in place since April 2021 (and April 2017 in the public sector). However, this would be expected soon and at the very least HMRC’s CEST tool will need a review.

It would be prudent for all to wait until the government has published the specifics of repeal and to understand the detail, so for now they should carry on as they have been with meeting their obligations under Off-payroll in determining the status of the contractors engaged that fall under these rules.

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