The new chancellor Jeremy Hunt has scrapped the IR35 reform repeal that was planned by his predecessor Kwasi Kwarteng.
Mr Hunt made a number of changes to Mr Kwarteng’s mini-budget, which resulted in political and financial turmoil in the UK.
Nearly all of the tax measures in the growth plan have been reversed, while Mr Hunt has signalled the end of the energy support package.
Among the changes Mr Hunt made to Mr Kwarteng’s plan is to reverse the repealing of IR35 off-payroll working rules.
But, what exactly are the IR35 reforms, and what does the repeal mean?
What are the IR35 reforms?
IR35 refers to off-payroll working rules, which apply to workers who provide their services through their own limited company or another type of intermediary to the client.
These rules try to make sure these workers pay broadly the same national insurance and income tax contributions as the employees who directly work for the client.
Before the reforms in recent years, contractors were in control of determining how much they should be taxed through self-declaring.
However, on April 6, 2017, the government made public authorities responsible for deciding if the IR35 rules applied to get ahead of those who were deliberately taking advantage of the system and dodging tax.
On April 6, 2021, all public authorities and medium and large-sized clients outside the public sector were made responsible for deciding if the rules apply.
What did the IR35 reform repeal entail?
Just a few weeks ago, Kwasi Kwarteng set out a controversial mini-budget, which he and Prime Minister Liz Truss said focused on growth.
The former Chancellor of the Exchequer, who was fired from the position on October 14, had explained his plan to address the complexity of the tax system and thought it necessary to repeal the 2017 and the 2021 off-payroll working rules known as the IR35 reforms.
He argued this would free up time and money for businesses that work with contractors and minimise the risk of self-employed workers being impacted by the off-payroll rules.
Many in the contracting community had welcomed the decision, agreeing that the reforms made it harder, and more costly and restricted the time available for enterprises to hire flexible labour.
However, the mini-budget led to an incredible dip in the value of the pound and received criticism from both the Bank of England and the International Monetary Fund, eventually causing Ms Truss to U-turn on a number of financial plans and letting go of Mr Kwarteng.
Jeremy Hunt was announced as his successor, with the new Chancellor of the Exchequer issuing an emergency statement on October 17.
Hunt scrapped the IR35 reform repeal alongside almost all of the other financial decisions the PM’s Government had made thus far, which means that the 2017 and 2021 reforms will stay in place.
