IR35 Off Payroll Scrapping May Now Be Cancelled

Contractors IR35 Question
Contractors IR35 Question

Off Payroll IR35 Changes May be Scrapped

According to The Times today the scrapping of the IR35 Off Payroll changes may be cancelled.

Liz Truss and Chancellor Kwasi Kwarteng are coming under heavy pressure to dump the mini-budget altogether and so start from scratch.

If it was all to be dumped then the Chancellor’s negating of the 2017 and 2021 Off Payroll changes may go too.

Who Decides a Contractor’s IR35 Status?

In 2017 the Government changed the IR35 rules in the public sector so that it was the Government department who would decide if a contractor was caught by IR35 or not.

This was extended to the private sector in 2021 where the company hiring the contractors would decide their IR35 statuses.

There would be financial penalties on the companies if they got it wrong.

This scared many top companies into banning contractors altogether – or testing all their contractors and finding them all inside IR35.

It had a huge impact on both contractors and the companies who hired them.

What Did the Chancellor Do About Off Payroll Rules?

So, contractors were delighted when the Chancellor scrapped this and changed it back to contractors deciding their own IR35 statuses.

However, because the Government under Liz Truss and Kwasi Kwarteng made such a pig’s ear of the mini budget that the financial markets got spooked they have come under pressure to change course.

There were big tax cuts but no explanation as to how they would be paid for.

So, Government advisors are telling the Prime Minister and the Chancellor that they should scrap the mini budget altogether and to start again.

How Will Contractors be Affected?

For UK contractors that would be throwing the baby out with the bathwater.

One would have to say that scrapping the Off Payroll rules would be seen as a tax cut – and only for the self employed.

Even if the Chancellor didn’t scrap the mini budget altogether there may well be pressure on him to make major changes which may include the Off Payroll changes.

He may decide that he doesn’t want to lose his job over a tax cut for lots of contractors and freelancers who are already pretty well off anyway.

Contractors Groups should lobby now to make sure that the scrapping of the Off Payroll rules are not themselves scrapped.

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