Unravelling IR35 Changes After April 2023

You might have heard about IR35 changes planned for April 2023. However, in October 2022, Chancellor Jeremy Hunt announced he would scrap most of the unfunded tax cuts predicted in the mini-budget, which also affects IR35.

As of July 2023, there have been no changes regarding the IR35 legislation, and off-payroll working rules remain the same as what was set in April 2021, after the COVID-19 pandemic.

HMRC intended the IR35 changes to create a clear distinction between independent contractors and full-time employees in the private sector in order to ensure proper tax contributions. To achieve this, IR35 would shift the responsibility for determining the status of contract workers and the associated tax risk to medium and large-sized private companies.

Why have tax changes been cancelled?

According to Hunt, cancelling the planned changes could save the UK government billions of pounds. The goal is to restore confidence in financial markets, helping reduce the interest rate on UK debt. 

Initially, the plan was to place responsibility for determining their employment status on workers providing services via an intermediary company. This meant that businesses that engage contractors would no longer have to use their resources to monitor contractors inside or outside IR35.  

As of now, the client company is responsible for determining the employment status of the worker or contractor. 

The responsibilities of an employer 

According to the HMRC, the IR35 applies on a contract-by-contract basis. When working with a contractor, the client can determine if the worker should be treated as an employee for tax purposes. 

An employer is the person in possession of the status determination statement (SDS). Or where no one in the labour supply chain meets the HMRC’s conditions to be qualified as an employer; the client is responsible for everything related to the IR35.

It is the responsibility of the employer to deduct income tax and National Insurance contributions, as well as making these payments. If you need help understanding IR35 and what rules apply to your company or business, see how Briars can assist you and contact us here.