Accountants have cautioned that IR35 uncertainties persist notwithstanding the UK’s Growth Plan’s elimination of harmful policies.
In his “Mini Budget” presentation from last month, Kwasi Kwarteng stated that the off payroll working regulations amendments between 2017 and 2021 would be repealed.
The surprise change will take effect in April of next year, probably came as a relief to many businesses as they would no longer be responsible for demonstrating a contractor’s tax status.
— Advisory Excellence (@_aenetworking) October 5, 2022
Lack of Details
Although there is “a paucity of granular detail,” according to Dave Hedges, tax partner at Azets, regarding how HMRC would handle the changeover over the ensuing months.
Hedges emphasised that aside from confirming the repeal, the written follow-up information released the day after the Chancellor’s address provided no details.
The first announcement’s brevity signals that substantial drafting work will now be done.
Claims Will They Be Pursued?
Hedges thinks another important factor will be whether HMRC decides to be more lenient with its handling of claims up until April 2023.
Moore Kingston Smith’s John Williams, director of employment tax, reminded companies that they must follow the standards governing off-payroll labour until April 5, 2023.
Penalties Could Be Applied
Williams emphasised that if an organisation is discovered to be in violation within the brief two-year time that the off payroll working regulations are in effect, penalties may still be assessed.
He brought up their frustration, even though he thinks the amendments will aid businesses utilising limited company contractors to lessen their administrative and tax load.
Williams also stated that there was still a lack of clarity regarding the rules for assessing employment status under IR35, particularly in light of the “inconsistent results from case law” and inadequate HMRC guidance.
As an alternative, he recommended that the government establish a “clear statutory standard” of job status to eliminate any remaining ambiguity.
Bans on Contractors in General
In the upcoming Autumn Budget, which is anticipated for November, Stephen Kenny, a partner in PKF Littlejohn’s personal tax practise, anticipates hearing more information from the government.
Kenny adds that the types of employees that companies may think about hiring once the reforms are repealed may alter.
He does, however, note that there may still be some abnormalities that require more explanation in the upcoming months.
In a similar vein, Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed, claimed that while contractors have received “tremendous boosts,” it is best to exercise caution for the time being.