IR35 is changing (again!) – What does this mean for contractors and clients?

Today’s IR35 announcement will be music to many people’s ears but what does this mean for you?

Ever since IR35 was brought into the public sector (2017) and, most recently, the private sector (2021), it’s been quite a hurdle for many businesses and contractors. However, Kwasi Kwarteng – the UK’s newest Chancellor – announced in today’s mini budget (23rd September 2022) that they’ll be repealing IR35 from April 2023.

Although this isn’t exactly shock news – as Liz Truss alluded to IR35 reforms in an interview in August 2022 – the particulars of what the new conservative cabinet will actually do are still unknown.

As you can imagine, this is still an evolving topic and the particulars have yet to be laid out. However, this is how the Revoco team see it:

What does the change in IR35 mean for contractors?

For contractors, the change means one (huge) thing.

In short, anyone who provides their services through an intermediary, such as a personal services company, will again be responsible for determining the status of their employment. This will also include working out and paying the correct amount of tax and national insurance contributions. So back to the way it was pre-April 2021 (or 2017 if you were in Pub Sec).

What does the change in IR35 mean for businesses?

You won’t need to use the CEST tool again (“whoop” I hear you chant). This change will put all of the work back onto contractors and their limited companies, helping businesses save time and money.

A few things to observe…

To hire and retain top quality contractors inside IR35, some companies have had to pay much higher rates to them – which will have definitely had a big impact on your spend.

So what will happen next April? Will rates change?

For many businesses that have seen an influx of ex-contractors joining them as permanent employees, you’ll need a game plan. This news will obviously pique the interest of many people, so it is a good time to start planning on how you’ll retain these employees with niche skills.

However, even as I write this, there are more questions than answers!

Whilst this is, on paper, great news for both the self-employed and businesses, this has left us all with a lot of questions.

• What will happen to contractors who are currently inside IR35 contracts that extend past April 2023?
• How will the job market react?
• How will HMRC do things differently? Will there be an increase in investigations?
• For those in sectors who just went blanket inside IR35, how will they be affected?
• Companies have made huge strides in “correcting” their workforce dynamics of perm to contract ratios. Will this change have a negative impact on this again?

We’d love to hear the thoughts of businesses and contractors! What does this change mean for you?

If you would also like to chat with me about any of this then please drop me an email at iblair@revoco-talent.co.uk and I’d be happy to share my thoughts from both sides of the fence.