Last Friday, the Chancellor of the Exchequer, Kwasi Kwarteng, announced in his ‘mini budget’ that the 2017 and 2021 public sector and private sector reforms to the IR35 rules would be repealed from 6 April 2023.
Currently, where an individual contractor provides their services to an end-user through a private services company (usually, but not always, a limited company), the end-user is responsible for determining whether the arrangement is inside or outside IR35. If the determination is that the individual is inside IR35, the arrangement is ‘deemed employment’ and the individual must be included on the ‘fee payers’ payroll and taxed as an employee. If the individual is erroneously determined to be outside IR35, the fee payer will have liability for any shortfall in tax and NI owed to the Government.
From 6 April 2023, the IR35 rules will return to their pre 2017 position, making the individual contractor once more responsible for determining IR35 status, and liable for any shortfall in tax and NI if the determination is incorrect.