A few weeks ago, we brought you news that following the Government’s now infamous mini-budget the off-payroll working rules (known as “IR35”) put in place for public and private sector businesses from 2017 and 2021 would be scrapped from April 2023.
However, on 17 October 2022, the newly installed Chancellor announced a major U-turn concerning most of the tax measures previously announced in the mini budget – including the plans to scrap the off-payroll working rules from April 2023.
IR35 rules are concerned with the taxation of individual contractors engaged by businesses via an intermediary such as a personal service company. Historically, the issue of determining whether the contractor was self-employed or an employee for tax purposes was a matter for the contractor. This was altered in 2017 and 2021 when the IR35 rules changed and the end user business (i.e. the organisation which actually makes use of the contractor’s services) was required to determine the correct tax status of the engagement.
In light of the U-turn, businesses will continue to be required to determine the correct tax status of the engagement (and pay the tax and NI where appropriate).
Businesses engaging contractors should continue to consider the application of IR35 and ensure they keep the necessary records of their checks and tax status determinations. IR35 represents an easy source of revenue for HMRC in terms of fines and therefore it makes sense for businesses to become and remain compliant sooner rather than later.