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Repeal of public and private sector IR35 reform offers a positive boost for interim consultants

Interims and contractors have received an unexpected boost after the Government announced during the Mini-Budget that it would be repealing the IR35 reforms for both the public and private sector.

The repeal will come into affect from April 2023, when workers providing their services via an intermediary will again be responsible for determining their own employment status.

The first IR35 reform had been introduced in 2017 as an anti-avoidance tax legislation designed to tax ‘disguised’ employment, with another reform in 2021. However, the reforms have been heavily criticised by the contractor sector, and even led to some organisations outright banning all limited company workers.

Prime Minister Liz Truss had previously stated that only off-payroll rules would be reviewed, but Chancellor Kwasi Kwarteng surprisingly confirmed that the ‘unnecessary cost and complexity’ of the IR35 reforms will be repealed for both the public and private sectors.

Seb Maley, of IR35 contract review firm Qdos, said: “The fiscal changes announced today are likely to go down as some of the most pro-contracting in memory. Repealing IR35 reform is a huge victory for contractors. The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them.

“The Government must not waste time, though. The last thing contractors and businesses impacted by IR35 need is uncertainty. A clear and robust roadmap for reversing IR35 reform in both the public and private sectors is needed.”

The IR35 reform repeal in both the public and private sectors is expected to come at a significant cost. The exchequer is estimated to lose £6.18billion, beginning with £1.1bn in the 2023/24 financial year. By 2026/27, the annual loss is estimated to reach £2.04bn.

The repeal joins a number of other measures announced by the Chancellor, including the cancellation of a planned increase in corporation tax and a reversal of the 2021 rise in NICs.

Phill Machell

Phill Machell, former Executive Director at Michael Page Interim, has been appointed as Partner at Bailey Montagu, one of the UK’s most innovative and respected executive search and interim management firms.