Here is a summary of the reforms from the September mini budget;
- Rather than reversing IR35 rules as a whole, the new government aims to abolish the reforms of 2017 and 2021.
- If the reversal goes ahead in April 2023 as planned, self-employed contractors and freelancers who work through their own limited company will once more be responsible for working out their own IR35 status.
- The reversal is still only a government aim and isn’t yet law. It will need to go through parliament in the usual way, drafted in the next Finance Bill.
- We have created this content for general information purposes and it should not be taken as advice. Always take professional advice
What is IR35?
- IR35 is another name for the off-payroll working rules
- Self-employed IR35 rules are designed to work out whether a contractor is someone who’s genuinely self-employed rather than a ‘disguised’ employee, for the purposes of paying tax.
- That’s because contractors who set up and work through a limited company enjoy some tax efficiency.
- While they don’t usually get employee benefits (like holiday and sick pay), they have flexibility and control over their work.
- When a contractor is a ‘disguised’ employee, they’re taking advantage of the tax efficiency of working through a limited company, but otherwise they should be classed as an employee.
- ‘Disguised’ arrangements benefit employers too, because they don’t have to pay employers’ National Insurance contributions (NICs) or give any employee benefits to contractors.
- Smaller businesses are exempt, which means it remains your responsibility to determine your IR35 status when working for them.
What is classed as a smaller business?
End clients are classed as small businesses if they meet two of the following criteria, for two consecutive financial years:
- annual turnover of no more than £10.2 million
- balance sheet total of no more than £5.1 million
- no more than 50 employees
Reference : https://www.simplybusiness.co.uk/knowledge/articles/2022/02/what-is-ir35/