In the recent mini-budget delivered on 23 September 2022, there was an unexpected change announced to the off-payroll working rules known as IR35.
The reforms of 2017 and 2021 will be repealed from 6 April 2023. This means we will go back to contractors providing services through an intermediary, such as a PSC, deciding if they are caught by the IR35 rules. This will remove the requirement that a status determination statement (SDS) be issued by the engager. The responsibility for paying the correct amount of tax and National Insurance will once again fall on the PSC based on their understanding of the rules.
When the changes were introduced requiring the engager to make a decision and issue an SDS to PSC’s, the complexity of the rules and potential penalties for getting the decision wrong, forced many engagers to cease using contractors. Many moved in the direction of forcing contractors to work through umbrella companies.
The statement from the Chancellor was as follows:
The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
It remains to be seen if this surprise change goes ahead on 6 April 2023.
It will be interesting to see if the proposed changes will entice companies to once again offer contracts to intermediaries working through PSC’s or if they are happy to carry on as they are.
I wonder how many contractors ditched their companies and either took up employment or moved to an umbrella company. Will they want to start up another company and seek an engagement through it?
What is clear is that IR35 is still in place. The same principles will still apply when deciding if your contract is inside or outside of IR35. The main deciding factors will still be:
- Substitution – can one offer a substitute or is your personal service required?
- Control – Are you controlled as to the manner in which the work is carried out or do you decide how work is completed?
- Mutuality of obligations – is there an obligation for the engager to offer work and if work is offered is there an obligation for the contractor to undertake it?
There are of course other factors to consider but these are the main ones.
Should you be offered a contract through your PSC, we can review this for you and let you know if in our opinion you are inside or outside of IR35. Please contact Duncan Forsyth who works with our team of accountants in Shoreditch London, who will be happy to answer any questions you may have.
Lambert Chapman Shoreditch London office: 020 7148 0872.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.