IR35: Recent changes to be repealed

Organisations will recall that the IR35 regime underwent significant reform in recent years, first in 2017 for the public sector, and again in April 2021 for the private sector (our previous update here explains more of the background). However, the government has now stated that “In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses”.

The intention is for the 2017 and 2021 reforms to be repealed, and for the system to revert back to what is was before then, with compliance being kept “closely under review”.

This is very welcome news for end-user clients that currently have to grapple with the need to make status determinations for individual contractors. This responsibility will revert back to being that of the individual contractor/personal services company (“PSC”). Importantly, it also means that the end user will no longer be liable for PAYE or NICs if the status determination is incorrect – the PSC will be liable instead.

It is currently unclear how the government’s “Check Employment Status for Tax” (“CEST”) tool will be updated or if it will be available for contractor use.

We will keep you updated.

This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. Greenwoods Legal LLP is a Limited Liability Partnership, registered in England, registered number OC306912. Our registered office is Queens House, 55-56 Lincoln’s Inn Fields, London, WC2A 3LJ. A list of the members’ names is available for inspection at our offices in Peterborough, Cambridge and London. Authorised and regulated by the Solicitors Regulation Authority, SRA number 401162. Details of the Solicitors’ Codes of Conduct can be found at www.sra.org.uk. All instructions accepted by Greenwoods Legal LLP are subject to our current Terms of Business. VAT Reg No: 161 9287 89.