Tax alert: Repeal of IR35 reforms


Presenting her Mini Budget on September 23, 2022, the Chancellor announced a wide range of tax cuts and reforms, with a focus on boosting Britain’s incentive, investment and competitiveness on the World Scene. In a significant (and unexpected) twist, it has also been announced that the reforms made to the IR35 non-wage work scheme in 2017 (for the public sector) and in 2021 (for the public and private sector) will be repealed from 6 April 2023.

As a reminder, the IR35 regime (in the broad sense) applies when a person provides their services (directly or indirectly) through a personal services company (a SSP) or another qualified intermediary to a other person or entity (an end user) in circumstances where, had the person provided their services directly to the end user rather than through their CSP, they would have been an employee (or office holder) of the end user.

What changed?

As a result of the 2017 and 2021 reforms, end users currently (except in limited circumstances) have an obligation to determine whether or not an arrangement with a person constitutes deemed employment for the purposes of the regime and, if so, to provide details on this. determination to the other parties in the contractual chain. To the extent that the end-user determination is one of deemed employment, it will generally be up to the part of the contractual chain that makes payments to the PSC (the payer) to include the individual on its list of payroll and account for income tax and national insurance obligations on payments made to the PSC.

The regime currently places a significant compliance burden on end users and in many cases has resulted in increased costs and complexity for businesses. This in turn has led many end users to restrict the use of PSC agreements and move to alternative engagement models (particularly through the increased use of so-called “umbrella companies”) .

It is important to note that the repeals announced by the Chancellor did not relate to the entire IR35 regime but to the reforms made in 2017 and 2021. This means that from 6 April 2023 the regime that existed before these reforms will be a times apply again to all relevant engagements, meaning that it will be the responsibility of the individual/CSP (not the end user) to determine employment status and deal with any resulting tax consequences.

What does this mean for an end user?

Importantly, until April 6, 2023, end users must continue to comply with all of their current obligations under the IR35 regime, making employment status determinations, transmitting those determinations to the sourcing and (where they are the payer) paying the right amount of tax and NIC.

Although these obligations disappear from April 6, 2023, before that date end users will need to consider the wider implications this will have for their business and take action accordingly. For instance:

Engagement models

Decisions and policies regarding engagement models may need to be reconsidered, particularly where CSP bans have been put in place.


In many cases, the current IR35 regime has resulted in increased costs within the supply chain, which has often been passed on to the end user through higher fees and charges. The relevance and commercial positioning around the pricing terms may need to be reviewed from April 6.

Process and documentation

Most end users spent a lot of time reviewing and updating their onboarding processes and contract documentation, to ensure they remained compliant with their obligations under the IR35 regime. The complexities and increased obligations that have been introduced into such a process may no longer be necessary. Contractual documentation that has changed to meet imposed obligations is now likely to become outdated and (unnecessarily) convoluted. End users should take the opportunity to review the adequacy of these processes and documentation, and, where appropriate, simplify and streamline them, while maintaining an appropriate level of built-in protection against business risks and any another change in the field.


End users are likely to want to think carefully about the communications they have with data subjects and other parties within supply chains, regarding changes to the IR35 regime. Just as good communication has been important in managing the transfer of obligations under the Scheme to end users, good communication will be of equal importance when managing the transfer of obligations under the Scheme to end users. individual/the CSP.

Continuous risk management

For many end users, the imposition of obligations under the IR35 regime was the first time that attention was given to supply chains in light of any payroll tax regime. In particular, the importance of identifying problems at the integration stage was fully appreciated and integrated.

However, the IR35 scheme is not the only payroll tax-free scheme that can impact end users. For example, obligations and liabilities may still arise for end users under managed service company rules, agency rules and/or offshore intermediary rules. End users should take the opportunity to ensure that the processes adopted to control supply chains with respect to the IR35 regime are not completely abandoned when these processes will be useful to manage other risks related to social charges . End-users should also remain aware of their wider obligations, such as under the Criminal Finances Act 2017, which makes it a criminal offense to fail to prevent certain types of tax evasion by persons providing online services. their name.

Impact on employment status

Note that while the repeal of the IR35 reforms is likely to reduce the tax risks associated with the use of ESPs, companies should be aware that employment status risks remain. Recent employment case law has taken a purposive approach to employment status determinations, so there remains a risk that an employment tribunal may conclude that a person working through a CSP is an employee or a worker and finds an implied contract. The proposed changes to IR35 do not eliminate this element of risk for businesses that hire people to provide services through a CSP.

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