On the 23rd September, the new mini budget marked a huge change in direction in economic policy for the newly established government.
In his speech, the chancellor announced that the changes to off-payroll rules, known as IR35, are to be scrapped.
IR35 was introduced in 2017 for the public sector and in 2021 for the private sector. The rules apply to contract staff and make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same Income Tax and National Insurance contributions as employees.
The rules were described as having added an extra layer of complexity and cost for many businesses. To simplify the UK tax regime, the government will repeal the changes to off-payroll rules from 6 April 2023.
What do the changes in IR35 mean for businesses?
The repeal of the off-payroll rules means a return to the pre-2017 position. Before 2017, the rules stated that any personal service companies (PSCs) engaged for work or service by any third party were responsible for determining its own worker’s status for tax and accounting purposes.
For organisations that engage contractors, the changes will free up time, money and resources which can be re-directed toward other priorities, while minimising the risk that genuinely self-employed workers are impacted by the off-payroll rules.
Many businesses have welcomed the changes.
The nature of contract work means that often these professionals were needed quickly by organisations. Businesses wanting to onboard Limited Company contractors were held back by red tape and admin.
The confusion over the work needed to carry out status determination assessments was just one hurdle. Factoring in changes and updates to longstanding contractor agreements and accounting for the changes to tax and NI are just two more.
The changes led to many organisations turning to agencies. Not only could we help source contractors, but we could also deal with a lot of the red tape. Outsourcing status determinations and covering the cost were just some of the functions agencies fulfilled.
However, factoring in the cost of agency fees for hiring meant that this move had some downsides.
The pandemic and the uncertainty of the UK’s wider economic position have forced the hand of many organisations. Recognising its commercial benefits, we have seen an upturn in the number of businesses willing to tackle the complexities of IR35 and engage contract workers.
Contract workers afford companies flexibility and scalability of the workforce. The tenure can be task or project-based without the commitment and associated responsibilities of permanent hiring.
What’s next?
Ahead of 2023, there’s more work to be done! Further contract reviews of long-term contractors will need to be undertaken, and changes made.
Client organisations and agencies will need to review the terms of their PSC arrangements and supplier agreements to make sure they are ready for the new era.
Are you a contractor looking for your new contract assignment? We can help.
Reach out to us today or head over to our contract jobs page.
