Mini-Budget Reaction

The end of IR35 may not yet be the end of employment complexity.

The new Chancellor’s ‘mini-budget’ has had a bigger impact than many usual budgets from previous governments. From tax cuts and promises of more to come to the dramatic impact this has had on the value of the pound, the new Truss-led government appears to be pulling no punches when it comes to considering its next moves with the economy.

Naturally the recruitment industry’s main focus was on the sudden axing of IR35 legislation – a step which was unexpected and welcomed in equal measure.

“Reducing the counter-productive rise in employer National Insurance – a tax on creating jobs and paying people more, that falls heavily on the sectors most affected by the pandemic – is wise,” commented REC CEO Neil Carberry,

“Ditching the botched changes to IR35 – the rules on how temporary contractors are paid – is also a huge help. These have been big REC campaigns, and we welcome today’s announcements. The changes will provide many businesses with much needed relief, when taken into the balance with short-term support on energy bills. It is not enough to simply tear things down though” Carberry continued, “we also need to build on IR35, retained European regulation, investment zones and infrastructure there is hard work to do on replacement rules, and in some cases little time to do it. Business is ready to help – but we will need action from Government to make things happen”.

Tania Bowers, global public policy director for the Association of Professional Staffing Companies (APSCo) also welcomed the repeal of the Off Payroll legislation. “Many of the proposals in today’s announcement will strengthen the appeal of highly skilled, professional flexible working in the UK which is long overdue,” she said. “The planned changes to Income Tax from April 2023 – in particular the abolition of the top rate of income tax for the highest earners – and reversal on the planned increase in Dividend Tax alongside the IR35 repeal, will encourage more individuals back into the flexible labour market to drive growth at end-engagers.”

Bowers also felt there was an intention from the government to make the UK a global powerhouse and noted the removal of the banker bonus cap was likely to strengthen the country’s Financial Services sector.

Crawford Temple, CEO of Professional Passport acknowledged the removal of the ‘car crash’ that was IR35, but also sounded a word of caution adding that the government needs to press HMRC to provide detailed guidance relating to the application of the MSC Legislation. “I would go further and suggest a review of both IR35 and MSC Legislation needs to be carried out urgently so that contractors are not inadvertently operating under schemes that would apply full PAYE to their income from April,” he said. “IR35 is flawed and the government should start with a clean sheet of paper and design a strategy for the modern workplace.”

Dave Chaplin, CEO of tax compliance firm IR35 Shield aid contractors and businesses should be celebrating the end of this legislation. “These onerous reforms were never going to work and were flawed from the start,” he said. “The recent Court of Appeal Atholl House case further highlighted the structural deficiencies of the legislation.

“The new version of IR35 has simply served to pour glue on the economy and prevent growth. The Chancellor has done the right thing and removed an unnecessary burden for firms of trying to solve a complex riddle every time they hire a worker.”

Finally, Russell Upton, key accounts director at Parasol was not alone in noting that the repeal is not the end of the story around this legislation. “The public and private sectors have endured a huge amount of disruption because of IR35 reforms and just when it felt as if the dust had started to settle, the Chancellor confirmed that all the reforms would be repealed from April 2023,” he said. “This will be a complex task with a series of legalities surrounding it, but it could also be a game-changer for the industry. The changes come into play from April 6, 2023, so there will be a lot of work to be done before then to unpick what is currently in place.”

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