“It remains to be seen whether Off-Payroll Working and IR35 will be revisited again in the event of a leadership change post an election.” Me, September 2022, in my previous blog on the topic, from when a rollback of the Off-Payroll Working Rules was announced by then-chancellor Kwasi Kwarteng.
And here we are, 3 weeks since that blog post, with the aims of the anything-but-mini-Budget shredded more dramatically than Banksy could shred his own artwork at Sotheby’s.
Organisations in the UK which use off-payroll workers could’ve been frustrated at the thought of potentially reversing the Off Payroll Working Rules. After all, there could have been internal challenges from workers, potential attrition, new processes, figuring out how to manage compliance given the Criminal Finances Act, and even determining yet again how to advertise roles.
But with the Off-Payroll Working Rules now staying, who are the winners and losers?
- HMRC. HMRC had originally put in the Off-Payroll legislation to increase compliance with IR35 without having to increase their headcount. A reversal of the Off-Payroll Working Rules could’ve led to billions less in taxes being collected if HMRC once again struggled to manage compliance. The 2022 National Audit Office (NAO) report on the Investigation into the Implementation of the IR35 Tax Reforms noted that for the public sector rollout that started in 2017, “an additional £550 million of income tax and NICs [National Insurance Contributions] was collected in the first year.” Sums like that, when added to what the private sector rollout brings in, would’ve been hard to let go from a government budget.
- Change Managers. Those who would’ve been responsible for managing the changes inside their organisations again will now not have to reconfigure what was put in place in 2017 and 2021. Change managers can breathe a sigh of relief that existing processes stay as they are.
- Umbrella companies. Umbrella companies saw a boom in business growth from the introduction of the Off-Payroll Working Rules as many organisations put their “inside IR35” workers on a PAYE payroll to ensure tax and National Insurance were deducted and paid.
- End-user organisations who may have thought that the rollback of the Off-Payroll Working Rules would mean less paperwork for them and less direct liability should they fall foul of the legislation. [Notably, the Criminal Finances Act still puts responsibilities to prevent the facilitation of tax evasion, so liability still would’ve been an organisational risk if the Off-Payroll Working Rules had been reversed.]
- Workers who relished the control of determining their IR35 status themselves from before the Off Payroll Working Rules were in place will continue to be reliant on their end client’s decisions.
- Accounting firms. Accountants who anticipated that more personal service companies would once again require their services will have had their hopes dashed.
- IR35 Insurance peddlers. There are those who sell insurance products that promise to defend workers who are subject to an IR35 investigation and even cover potential fines. Inside IR35 workers who stay on PAYE payroll (either directly via the client or agency, or via an umbrella company) won’t need IR35 insurance.
And as for procurement? Take very sensible longstanding British advice: Keep Calm and Carry On. Assess your roles, advertise accordingly, communicate the assessments to suppliers and workers, ensure compliance throughout the supply chain, keep records, and check that working practices reflect the contracts and assessments periodically. As you were.