The chancellor has pledged to repeal controversial changes to off-payroll working laws in an attempt to boost the labour market.
Kwasi Kwarteng criticised IR35 changes, which came into force for the public and private sector in 2017 and 2021 respectively, for adding “unnecessary complexity and costs” for businesses.
It will be hugely welcome news for thousands of North Sea oil and gas freelancers and contractors who have been hit hard by the reforms.
The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them.”
Seb Maley, chief executive, Qdos.
Implemented by HM Revenue and Customs (HMRC), the changes make it the duty of firms to decide whether personal service companies are effectively regular employees. – or inside IR35.
If contractors are judged to be more like regular workers, they pay a higher level of tax.
Businesses face lofty fines if they are not IR35-compliant, which has led many to implement blanket rules.
The chancellor’s commitment to roll back the reforms will make it simpler for companies to tap into pools of contractors.
Mr Kwarteng, the former business secretary, said: “We can also simplify the IR35 rules, and we will. Practice reforms to off-payroll working have added unnecessary complexity and costs for many businesses.
“So as promised, by the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”
As part of her campaign to become prime minister, Liz Truss promised earlier this year to carry out a review of IR35 rules.
In the run-up to today’s mini-Budget, experts predicted any changes to the guidelines would likely be minimal.
Widespread criticism over IR35 changes
Much criticism has been levelled at the changes to off-payroll working regulations since they were first announced.
Unions have repeatedly highlighted the impact on contractors, many of whom saw their take-home pay dramatically reduced.
Recent research, published a year into the reforms, revealed the intricacies of IR35 rules were putting businesses off using contractors.
It was also found around half of freelancers had thought about closing their businesses, retiring, or leaving the UK entirely due to the reforms.
No time to waste
Seb Maley, chief executive of insurance provider Qdos, said: “Repealing IR35 reform is a huge victory for contractors.
“The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them.
“The fiscal changes announced today are likely to go down as some of the most pro contracting in memory.
“The government mustn’t waste time though. The last thing contractors and businesses impacted by IR35 need is uncertainty.
“A clear and robust roadmap for reversing IR35 reform in both the public and private sectors is needed.”
Conversation