Decision damages the flexibility of the UK labour market

Yesterday, the newly appointed Chancellor, Jeremy Hunt, upended much of the Mini Budget that his predecessor, Kwasi Kwarteng delivered less than a month ago. Hunt announced that he would scrap a planned repeal of the IR35 reforms (off-payroll) which came into effect in April 2021.

In the Mini Budget speech titled ‘The Growth Plan 2022’ that was given in September, Kwarteng delivered on Prime Minister Liz Truss’s promise to review IR35 legislation.

Understandably, this has caused frustration in the off-payroll community following hope of the repeal of legislation that added unnecessary complexities to the contractor workforce and organisations.

Clarke Bowles, Chief Revenue Office at My Digital spoke exclusively to TALiNT International:

“The new Chancellor, Jeremy Hunt has effectively lit a match under the Mini Budget, as a result the off-payroll working rules will remain in place for both the public and private sectors creating a multiverse style glimpse into what could have been. The repeal of the repeal effectively means business as usual as it has been since 2017 for the public sector and 2020 for the private sector whereby the end client has the responsibility to assess and then pass down an SDS (Status Determination Statement) and the fee payer carries the majority of liabilities. Cancelling the Off-Payroll Working Rules repeal seems, dare I say it, like a ‘blanket approach’ to all of Kwasi’s Mini Budget points and this one in particular won’t help the growth of the economy which relies heavily on flexible workers in the UK labour market, the repeal had the potential to serve as a catalyst to economic growth it’s unfortunate that we came so close to this being a reality but are unfortunately left with a piece of legislation which was never really fit for purpose. Whilst IR35 is incredibly complex I will continue to advise that accurate and fair assessments are and always have been the way forward, ensuring those who are genuinely outside of IR35 can continue to work in that manner.”

IR35 specialist, Qdos, also responded to the news. Qdos CEO, Seb Maley, said: “I’m lost for words. The chaos, uncertainty and disruption caused by the mini-Budget is unprecedented. While U-turning on some tax cuts made sense, cancelling the repeal of IR35 reform is the wrong decision at the wrong time. It’s a knee-jerk reaction from the government and, in my opinion, won’t benefit the economy. IR35 reform damages the flexibility of the UK labour market, which is key to economic growth. Many contractors left the sector after risk-averse businesses stopped engaging them. Repealing reform would have opened the floodgates – a catalyst for the recovery of this sector.

“With IR35 reform now remaining in play, businesses must continue prioritising compliance. The legislation is complex and navigating it can be a challenge, but with the right approach can, in fact, be managed.”