[UK] What you need to know about Jeremy Hunt’s new IR35 reforms

The new UK chancellor Jeremy Hunt has scrapped the IR35 reform repeal that was announced by his short-lived predecessor in the role, Kwasi Kwarteng, Yahoo News reports.

Mr Hunt has now made a number of changes to Mr Kwarteng’s mini-budget, which caused political and financial chaos on its release.

Among the most significant changes made to Mr Kwarteng’s plan is the reversal of the repealing of IR35 off-payroll working rules.

But what exactly are the IR35 reforms and what does their repeal mean?

The IR35 reforms

IR35 refers to off-payroll working rules, which apply to workers who provide their services through their own limited company or another type of intermediary to the client.

These rules were put in place to try to ensure these workers pay roughly the same national insurance and income tax contributions as employees working directly for the client.

In recent years, prior to the reforms, contractors were in control of determining how much they should be taxed through self-declaring.

Then on April 6, 2017, the UK government made public authorities responsible for deciding if the IR35 rules applied to get ahead of those who were deliberately taking advantage of the system and dodging tax.

On April 6, 2021, all public authorities and medium and large-sized clients outside the public sector were made responsible for deciding if the rules apply.

What the IR35 reform repeal entailed

A few short weeks ago, the former chancellor, Kwasi Kwarteng announced a controversial mini-budget, which he and Prime Minister Liz Truss said was focused on growth.

Mr Kwarteng explained his plan to address the complexity of the tax system and believed it was necessary to repeal the 2017 and 2021 off-payroll working rules known as the IR35 reforms. He was fired from his position as chancellor on October 14. 

Mr Kwarteng stated that the repeal would free up time and money for businesses working with contractors and minimise the risk of self-employed workers being impacted by the off-payroll rules.

Many in the contracting community reportedly welcomed the decision, agreeing that the reforms made it harder, and more costly and had restricted the time available for enterprises to hire flexible labour.

However, the mini-budget led to a considerable drop in the value of the pound and received criticism from both the Bank of England and the International Monetary Fund. Ms Truss was eventually forced to U-turn on a number of financial plans and let Mr Kwarteng go.

Jeremy Hunt has been announced as successor and today (October 17) the new Chancellor of the Exchequer issued an emergency statement.

Mr Hunt has scrapped the IR35 reform repeal along with almost all of the other financial decisions Ms Truss’s Government had made so far, meaning that the 2017 and 2021 reforms will stay in place.

The new UK chancellor Jeremy Hunt has scrapped the IR35 reform repeal that was announced by his short-lived predecessor in the role, Kwasi Kwarteng, Yahoo News reports.

Mr Hunt has now made a number of changes to Mr Kwarteng’s mini-budget, which caused political and financial chaos on its release.

Among the most significant changes made to Mr Kwarteng’s plan is the reversal of the repealing of IR35 off-payroll working rules.

But what exactly are the IR35 reforms and what does their repeal mean?

The IR35 reforms

IR35 refers to off-payroll working rules, which apply to workers who provide their services through their own limited company or another type of intermediary to the client.

These rules were put in place to try to ensure these workers pay roughly the same national insurance and income tax contributions as employees working directly for the client.

In recent years, prior to the reforms, contractors were in control of determining how much they should be taxed through self-declaring.

Then on April 6, 2017, the UK government made public authorities responsible for deciding if the IR35 rules applied to get ahead of those who were deliberately taking advantage of the system and dodging tax.

On April 6, 2021, all public authorities and medium and large-sized clients outside the public sector were made responsible for deciding if the rules apply.

What the IR35 reform repeal entailed

A few short weeks ago, the former chancellor, Kwasi Kwarteng announced a controversial mini-budget, which he and Prime Minister Liz Truss said was focused on growth.

Mr Kwarteng explained his plan to address the complexity of the tax system and believed it was necessary to repeal the 2017 and 2021 off-payroll working rules known as the IR35 reforms. He was fired from his position as chancellor on October 14. 

Mr Kwarteng stated that the repeal would free up time and money for businesses working with contractors and minimise the risk of self-employed workers being impacted by the off-payroll rules.

Many in the contracting community reportedly welcomed the decision, agreeing that the reforms made it harder, and more costly and had restricted the time available for enterprises to hire flexible labour.

However, the mini-budget led to a considerable drop in the value of the pound and received criticism from both the Bank of England and the International Monetary Fund. Ms Truss was eventually forced to U-turn on a number of financial plans and let Mr Kwarteng go.

Jeremy Hunt has been announced as successor and today (October 17) the new Chancellor of the Exchequer issued an emergency statement.

Mr Hunt has scrapped the IR35 reform repeal along with almost all of the other financial decisions Ms Truss’s Government had made so far, meaning that the 2017 and 2021 reforms will stay in place.