In line with the promise to review IR35 rules, the government has decided to reverse the reforms introduced in 2017 and 2022. The new Chancellor Kwasi Kwarteng announced this surprising move during the mini-budget on 23rd September. In this article, we’ll explore what it means for contractors and self-employed.
What are the IR35 reforms?
HMRC rules determine whether a freelancer or contractor operating through their limited company is self-employed for tax-paying purposes. Whilst, historically contractors determined their employment status, the reforms put that responsibility in the hands of the clients (with an exception of smaller clients, where an employee is still responsible for determining their status).
Impact of the reversal of IR35 rules
When the reversal will take effect in April 2023, self-employed and contractors working through their limited company will once again more responsible for working out their IR35 status. Companies will be able to alleviate the cumbersome administratorial tasks and an additional costs of determining the IR35 status of contractors.
This will allow businesses to ‘get on with the business’ and create an easier environment to operate in for many freelancers and self-employed individuals.
Several Industries Welcome the Change
Both self-employed and businesses welcomed the change. These reforms caused an unnecessary complexity for both parties, causing businesses to reduce their intake of self-employed individuals and therefore reducing the volume of work between the two groups. Thanks to these changes, self-employed will once again benefit from an increased number of opportunities across a vast number of industries because of ease of employment from the perspective of the employers.
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