Reforms to the off-payroll working rules, known as IR35, are to be scrapped from April 2023, the Treasury has announced.
IR35 reforms introduced in the public sector in 2017 and the private sector in 2021 meant that the responsibility for determining a freelancer’s worker status shifted to the organisation engaging their services. The government will repeal these reforms.
What does this mean?
From 6 April 2023, freelancers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
Note that freelancers providing their services in their own name, as an individual, have always been responsible for determining their employment status.
Note the rules do still exist…..
This doesn’t necessarily mean it’s the end of the IR35 story – the rules will still exist and have always existed, namely:
• if freelancers are engaged in such a way that they are in reality employees, then they should be put on payroll and taxed as employees (see below on how to determine status).
• even without the spectre of IR35 looming, HMRC takes a dim view of organisations engaging freelancers when the reality is that they are working 9-5, Monday to Friday, for an indefinite period of time…
It is just that from April 2023, the responsibility for compliance and payment of tax has flipped back to the freelancer rather than on the organisation engaging that freelancer.
Someone is likely to be an employee if they….
• can be told what work to do, as well as how, where and when to do it.
• have to do the work themself.
• can be moved from task to task.
• are contracted to work a set number of hours and get a regular wage or salary, even if there is no work available.
• get time off for sickness and holidays.
• work for a business which is not their own and in which they are not a partner.
Someone is more likely to be a freelancer if they…
• agree to do the work, but could send someone else to do the job
• have several customers at the same time
• can do the work how, where and when they like
• run a business and take responsibility for its success or failure
• provide the main items of equipment or specialist tools required to do their work
IR35 reform is a huge victory for freelancers. The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them.
For advice on amending existing freelancer contracts or on the status of workers you engage please email nicola.goodridge@goodhr.co.uk or call +44 7917 878384
