Off-payroll repeal will not lead to a tax avoidance free-for-all. Dave Chaplin, CEO of IR35 Shield, explains
On 23 September 2022, the Chancellor, Kwasi Kwarteng, revealed a swathe of tax changes with one considerable surprise – a repeal of the Off-payroll working (“OPW”) rules (Chapter 10 of ITEPA 2003), colloquially referred to as the “IR35 Reforms”.
Most accountants know that OPW didn’t land very well with businesses. OPW first entered the statute in 2017, applying to the public sector, before being rolled out to the private sector in 2021. The Governments Growth Plan document indicated (section 3.44) why he chose to repeal the legislation from April 2023. The reasons were to free up time and money for businesses that engage contractors, which could then be put towards other priorities, whilst also minimising the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.
Kwarteng signalled that he wants to stoke growth, and he appears to have listened to private sector businesses who had been forced to trudge through the legislative sludge of OPW since April 2021.
However, whilst cries of “IR35 is dead” echoed through the halls of social media, the reality is that IR35 will remain in the form of the original Intermediaries Legislation (Chapter 8 of ITEPA 2003). HMRC now seek to enforce legislation that currently costs the Treasury £1.2bn per year.
It would be folly for all parties to expect to return to the days of facilitating widespread non-compliance with the rules. Businesses, recruitment agencies and contractors must consider preparations for what may happen next.
