Non-payroll work rules will be repealed from April 2023 | Bryan Cave Leighton Paisner
[co-author: Ellie Serridge]
In its 2022 Growth Plan released today, the Government confirmed that the 2017 and 2021 reforms to Non-Payroll Working Rules, also known as IR35, were to be repealed from 6 April 2023. The Growth Plan aims to set the first steps in removing complexity from the tax system. This was good news for many, as the rules have come under heavy criticism from entrepreneurs and businesses.
IR35 applies where a person personally provides services to a client through an intermediary, typically a personal services company (“PSC”), and in essence the relationship would be an employer/ employed if the intermediary was not involved. Where the rules apply, a deemed employment payment is deemed to be paid to the individual, who will be subject to tax as employment income and employer/sector national insurance contributions. employee (“NIC”). The 2017 and 2021 reforms shifted responsibility for determining whether an engagement was of such a nature to the end customer, with the burden of operating PAYE and collecting National Insurance (“NIC”) contributions falling to the end customer. “payer of fees” concerned in the job offer. chain.
In his Growth Plan 2022 speech, also delivered today, Kwasi Kwarteng criticized non-payroll working rules as having added “unnecessary complexity and cost to many businesses”.
What does this mean moving forward?
Essentially, the position will revert to that which prevailed before the introduction of non-payroll work rules in the public and private sectors. From April 6, 2023, workers across the UK providing their services through an intermediary such as a personal services company will once again be responsible for determining their employment status and paying the appropriate amount of tax and from NICs.
The expected benefits mentioned in the growth plan are:
- freeing up time and money for companies hiring contractors; and
- minimize the risk of truly self-employed workers being impacted by non-payroll work rules.
Companies should review their contractor engagement agreements prior to the planned changes taking effect.