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There are possible changes to off-payroll working rules that could be enforced from April 2023. IR35, often referred to as off-payroll working, has significantly evolved since 2017. From reforms to boost the contractor economy to shocking government U-turns, it can be hard to keep track of the changes when it comes to off-payroll working. Follow our guide to off-payroll working, its implications and discover what it means for workers in 2023.
Off-payroll working, sometimes referred to as IR35, is where an individual provides their own services through an intermediary to an end-user or client. An intermediary can be a partnership, personal service company or an individual. A contractor, on the other hand, would provide work through an external intermediary. This rule looks to ensure that workers providing their services pay the same Income Tax and National Insurance as an employee of the company would.
The simplest way to understand off-payroll working is by asking the question: would this worker be considered an employee if they were contracted directly rather than through an external agency or contractor? If the answer is yes, then this is considered off-payroll working.
For those applicable for off-payroll work, payable tax is determined by employment status.
The off-payroll working rule does not apply to the self-employed or those who would not be considered an employee if they were working directly for the client, such as contractors.
From the 6th of April 2017, the responsibility of deciding whether off-payroll working applies to contracted workers fell to public authorities.
From the 6th of April 2021, the responsibility of deciding whether off-payroll working applies to contracted workers fell to all public authorities, as well as medium and large-sized clients outside the public sector.
GOV.UK states that if a worker provides services to a small client outside the public sector, the worker’s intermediary is responsible for the decision.
In the mini-budget on the 23rd of September 2022, then-Chancellor of the Exchequer Kwasi Kwarteng announced a repeal of the reforms to the off-payroll working rules between 2017 and 2021 due to “unnecessary complexity and cost for many businesses”.
This repeal was designed to free up time and boost the contractor economy. IR35 rules have been widely criticised as a burden on the companies hiring contractors and meant that less people have wanted to hire freelancers.
Shortly after Kwarteng’s announcement, new-Chancellor Jeremy Hunt reversed the plans set out by Kwasi Kwarteng just a month before in a shocking statement for reasons unclear. There will be no changes on the 6th of April 2023.
So where do we stand as we head into 2023? With Jeremy Hunt’s announcement to reverse the reforms, guidance put in place from the 6th of April 2021 is here to stay.
So, with the continuous back and forth, what is the impact for businesses?
While at the end of last year, many businesses will have been preparing themselves to respond to off-payroll working changes, Jeremy Hunt’s announcement means no changes are required in April 2023. Off-payroll working will need to remain compliant with rules set out on the 6th of April 2021.
This brings to light conversations around the cost and complications for businesses with the current guidelines, and whether we’re likely to see any change in the future.
While off-payroll working can provide opportunities for many contractors, it can also pose issues for both parties involved. From changing rules regarding the responsibility of whether off-payroll working applies to the often-criticized and overly-complicated criteria, off-payroll working poses many challenges for both employers and employees.
For now, although the rules aren’t set to change, this conversation may be leading many businesses to consider whether they need to change their payroll provision in order to be fully compliant and keep up with IR35.
Payroll software can help with this. A fully automated, cloud-based solution can help for smooth payroll management, including the management of off-payroll workers.
Staffology Payroll software can support you with IR35 management. Discover how you can stay compliant and keep on top of the changes in 2023 with Staffology Payroll today. Get a demo.Duane Jackson, March 20th, 2023