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IR35 – Yet another ‘U-turn’

Posted
November 10, 2022
Employment Law

Last month, we reported on Liz Truss's plans to undo changes made to the IR35 regime, first made back in April 2021. So what has happened since she left office?

A U-turn on the U-turn…

By way of a reminder, in simple terms, IR35 is the tax regime by which HMRC looks to identify and appropriately tax the income generated by consultants who provide their services to their ‘clients’ via a limited company. More specifically, HMRC wants to flush out those cases where the manner in which the services are provided looks suspiciously like employment, but where the payment of full employment taxes is being avoided by the use of a limited company. Until recently, the tax risk under the IR35 regime sat with the company through which the consultancy services were provided. However, with effect from April 2021, in many cases, that risk transferred from the consultant’s company to the ‘client’ purchasing the consultant’s services.

After her appointment as Prime Minister, Liz Truss announced plans to make good on her promise to unwind the 2021 changes to the IR35 regime, reinstating the previous arrangements for the allocation of risk. Many were pleased to hear this news. However, as we know, Liz Truss has since resigned and almost all her plans for our economy have been ditched. So what of her intentions for IR35?  Well, for better or for worse, they have been ditched as well.

Where are we now?

To be clear, this means that (for now at least) the new ‘2021 laws’ appear to be here to stay.  However, IR35 will undoubtedly remain a contentious area. So it is always worth keeping an eye out for further developments. We may not yet have heard the last of this.

Need a hand?

If you need specific advice on where this all leaves you and your business, please get in touch. We’re here to help.

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