Changes to IR35: Where are we now?

One of the few positive announcements by the new Chancellor of the Exchequer in his mini-Budget was the reform of IR35.

For many years IR35 has been a real-life issue for self-employed consultants. There were major changes brought in, in both 2017 and 2021, including the shift of responsibility on to employers with an annual turnover of more than £10 million.

The unexpected move to reform IR35 is scheduled to come into force in April 2023 and will come as a relief to many firms who will no longer carry the responsibility of proving the tax status of the self-employed worker or consultant.

However, the written follow-up information which was published the day following the Chancellor’s speech offered little information beyond confirmation of the repeal of the 2017 and 2021 legislation. Many commentators have expressed the opinion that it is unlikely that we will receive any detailed guidance until early 2023.

Furthermore, it is believed that despite the reform, HMRC is likely to pursue claims up until April 2023 rather than take a softer approach between now and then. This will inevitably include penalties that could be charged if an organisation is found to have been non-compliant in the period up to April 2023.

There remains a doubt as to whether the hoped-for improvements to the HMRC CEST tool (which helps determine the employment status of self-employed contractors) will, in fact, be updated and improved. Other commentators have suggested that the government should introduce a “clear statutory test” of employment status that could help to clear up any confusion.

We will keep you updated on any further changes to IR35, but should you have any queries please contact our tax team today.

To learn about the current IR35 legislation you can read our full guide here.