IR35 (off-payroll) reforms repealed

Written By Guest User

TLDR:

Businesses will no longer be responsible for determining the tax status of third-party contractors they engage.

So what’s happening?

In a surprise announcement, during a mini-budget bulging with tax cuts, Chancellor Kwasi Kwarteng announced the repeal of the 2017 and 2021 reforms to off-payroll working rules. These additional reforms to IR35 required businesses to assess whether third-party contractors were able to be engaged as contractors, via their own PSC (Personal Service Company). As of April 2023, they’re gone.

“We can also simplify the IR35 rules, and we will,” Kwarteng told the House of Commons. “In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses. So, as promised, by my right honourable friend the prime minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”


And what does it mean for my agency?

It’ll simplify your operations. But it doesn’t mean you should wash your hands of compliance, because IR35 and its contingent tests and thresholds still exist, and will still be enforced. The responsibility for inside / outside IR35 determination (and the ultimate financial liability) now shifts back, from the business, to the contractor. There will be some contractors for whom this is massive news, and for all agencies, it’s a step in the right direction in terms of reducing your admin overheads.

As always, Granite is your go-to for strategic planning and guidance, as well as offering a suite of contractor solutions. Reach out to get help with the changes.


The biggest tax cuts in a generation?

That was the claim, and it may well be true. For a detailed breakdown, scroll on.

Income tax

  • Cut in basic rate of income tax to 19% from April 2023

  • Government estimates 31 million people getting £170 a year more

  • Currently, people in England, Wales and Northern Ireland pay 20% on any annual earning between £12,571 to £50,270 - rates in Scotland are different

  • 45% higher rate of income tax abolished for England, Wales and Northern Ireland taxpayers

  • One single higher rate of income tax of 40% from April next year

National Insurance

  • Reverse recent rise in National Insurance (NI) from 6 November

  • Workers and employers have paid an extra 1.25p in the pound since April

  • New Health and Social Care Levy to pay for the NHS will not be introduced

Corporation tax

  • Cancel UK-wide rise in corporation tax which was due to increase from 19% to 25% in April 2023

Benefits

  • Rules around universal credit tightened, by reducing benefits if people don't fulfil job search commitments

  • Around 120,000 more people on Universal Credit to be asked to take steps to seek more work, or face having their benefits reduced

  • Jobseekers over 50 to be given extra time with work coaches to help them return to job market

Work and investment

  • IR35 rules - the rules which govern off-payroll working - to be simplified

  • Annual investment allowance, the amount companies can invest tax free, remains at £1m indefinitely

  • Regulations change so pensions funds can increase UK investments

  • New and start-up companies able to raise up to £250,000 under scheme giving tax relief to investors

  • Share options for employees doubled from £30,000 to £60,000

Stamp duty

  • Cut to stamp duty which is paid when people buy a property in England and Northern Ireland

  • No stamp duty on first £250,000 and for first time buyers that rises to £425,000 - comes into operation today

  • 200,000 more people will be taken out of paying stamp duty altogether, government claims

Energy

  • Freeze on energy bills, which the government claims will reduce inflation by 5 percentage points

  • Total cost for the energy package expected to be around £60bn for the six months from October

Bankers' bonuses

  • Rules which limit bankers' bonuses scrapped

  • Package of regulatory reforms to be set out later in the autumn

Shopping

  • VAT-free shopping for overseas visitors

  • Planned increases in the duties on beer, for cider, for wine, and for spirits cancelled

Infrastructure and investment zones

  • Government discussing setting up investment zones with 38 local areas in England

  • Tax cuts and liberalised planning rules to be offered to release land for housing and commercial use

  • Investment zones offered measures such as no business rates and stamp duty waived

  • New legislation to cut planning rules, get rid of EU regulations and environmental assessments in an effort to speed up building

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