Contractors will once again be responsible for determining their employment status
Big news came for the contractor workforce last week when Chancellor Kwasi Kwarteng used the mini-Budget 2022 to repeal IR35 reform in both the public and private sectors, stunning and delighting the contractor sector in equal measure.
Mr Kwarteng said IR35 reform had imposed “unnecessary cost and complexity” for “many businesses,” so it will be repealed, “as promised by Prime Minister, Liz Truss.
In fact, during her campaign, Liz Truss only promised that the off-payroll rules would be reviewed, however that’s not stopping the contractor sector celebrating that all IR35 status decisions will be reverting to them from April 2023.
At chapter 3.44 of Mr Kwarteng’s Growth Plan, the government states: “From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status.
“And [they will be responsible for] paying the appropriate amount tax and National Insurance contributions.
“This will free up time and money for businesses that engage contractors, that could be put towards other priorities.”
Matt Fryer, Managing Director at Brookson Group, a People2.0 company, commented on what this means for recruiters. He said: “The U-turn will be welcomed by recruiters as it removes a significant compliance risk form their business and their clients. This should help to unlock the potential of flexible workforces at a time of increasing demand for highly skilled temporary workers, particularly in industries such as IT, engineering and energy. It does not, however, remove all compliance risk from resourcing contingent workers.”
Neil Carberry, CEO at REC also commented: “It is not enough to simply tear things down though – 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. Nowhere is this truer than on skills, where the failure to reform the failed Apprenticeship Levy continues to hold back employer training investment. Reforming the Working Time Directive allows us the opportunity to preserve rights on holidays, breaks and working weeks while removing the administrative nightmare faced by firms in calculating how they comply with the current rules, which were not designed for today’s economy. But we need to move quickly to do this, given the chaos that has been created by some recent court judgements.