Contractors rejoiced as chancellor Kwasi Kwarteng announced plans to repeal controversial reforms to off-payroll rules — known as IR35 — last week but experts highlighted the potential traps ahead.
From April next year, IR35 will continue to exist but the responsibility for determining and paying a worker’s IR35 tax status will go back to individuals rather than the businesses benefiting from their services. This reverses the changes made in 2017 for public sector workers and 2021 for the private sector.
The previous reforms were designed to crack down on tax avoidance, but had the effect of pushing many companies to force all contractors ‘inside IR35’ — where they are taxed as employees — to reduce risk and administrative chores.
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