The IR35 Repeal: 5 ways it Affects Business Compliancy
The announcement of the UK’s mini budget on September 23rd brought with it the widely welcomed repeal of the IR35 tax reforms, a highly complex and restrictive set of legislations that plenty of people will be glad to wave goodbye to.
IR35 was intended to combat tax avoidance by preventing full-time employees from disguising themselves as contractors, but regardless of intent, the IR35 represents a host of hoops to jump through for both contractors and recruiters.
The repeals will specifically target the 2017 and 2021 reforms to the rules, not the IR35 entirely. The reforms changed the burden of deciding status responsibility from the contractor to the recruiter in both the private and public sectors.
The repeals are set to come into effect in April 2023, so until that day finally comes, it’s worth familiarising yourself with what it means for your compliance efforts.
1. The Future is Still Uncertain
There is still a great deal of uncertainty surrounding the repeals and what they might mean for the future of compliance, and this is largely due to the lack of details on offer at the moment, a fitting
How the transition away from the IR35 legislation will take place is yet to be explored, but the terse nature of the chancellor’s announcement has left many with a sense of unease. It’s clear that the rule is yet to undergo a thorough transformation.
2. Less Admin, Faster Onboarding
One of the many joys that contractors bring to the table is their flexibility, a trait that allows them to slot into projects and plays a critical role on short notice.
The IR35 rule has consistently acted as a barrier to this adaptability, as the mountain of admin the rule represents can greatly slow down the onboarding process. The repeal will hopefully go a long way toward remedying this.
3. There’s Money to be Saved
The repeals will likely be good news for businesses trying to escape hidden costs, like intermediary fees or status tests, or the price of being inside the IR35 to begin with (a huge uplift potential of around 20% in some circumstances).
The more hurdles to jump through, the more money needed to comply. Whether that’s paying the wages of a dedicated compliance function or the costs of maintaining the relevant systems, the repeal represents an opportunity to save a great deal of money in both the long and short term.
4. Responsibility Will Once Again Rest with the Contractor
Now that the responsibility of deciding employment status will once again rest with the contractor, or the contractors' PSC, (rather than the employer) taking a huge amount of admin and risk off those wishing to hire freelancers.
Theoretically speaking, companies working with contractors will no longer need to possess a granular understanding of the IR35 rule, opening up much greater freedom in terms of recruitment availability.
5. IR35 Isn’t Going Anywhere Yet
Until April 2023, the IR35 reforms will stay firmly in place, and the details are likely going to undergo more changes. This means businesses wishing to work with contractors still have another year (at least) of operating under the IR35 legislation.
At Broadgate, we specialise in matching the top candidates to the perfect opportunities. If you’re in the market for a compliancy virtuoso, or you need to build an entire risk and analytics team from the top down, whatever your hiring needs in the world of business protection and enablement, our expert recruitment consultants are here to help.
If you have any questions about our services, the kind of markets we specialise in, our global talent network, or anything recruitment related, get in touch with our friendly team today, we’d love to be a part of your journey.