The Government has confirmed that the planned repeal of the off-payroll working rules will not go ahead after all.
Jeremy Hunt made the announcement on 17 October 2022, as part of a wider reversal of measures announced in the September mini-Budget.
Just three weeks earlier, Kwasi Kwarteng said the 2017 and 2021 off-payroll reforms would be removed from April 2023, with responsibility for IR35 status returning to contractors, rather than remaining with clients.
That pledge has now been withdrawn, and the current IR35 / Off-payroll regime stays in place.
You can read the Government’s summary of the reversals here.
What the reversal means
The immediate effect of the reversal is that clients, agencies and fee-payers remain responsible for establishing IR35 status under the off-payroll rules.
Contractors will not regain responsibility for determining their own status in April 2023. However, those working for ‘small company’ clients in the private sector already have this responsibility.
The Treasury said keeping the reforms in place would “support fiscal sustainability” and estimated that reversing the repeal would protect around £2bn in tax revenues each year. No further details were provided, and the announcement did not revisit any of the practical issues raised since the reforms were first introduced.
Background to the original announcement
Kwarteng’s September statement proposed removing the off-payroll rules in their entirety and returning to the original April 2000 Chapter 8 framework.
That would have meant the end of client-led status determinations, the end of SDS requirements, and the end of liability transfer through the supply chain.
The Government said at the time that the repeal would reduce complexity and improve labour market flexibility.
The October reversal means none of those changes will take place. Status decisions remain with the end-client, and fee-payers continue to carry PAYE risk where a role is assessed as inside IR35. Contractors remain subject to the regime that has been in force in the public sector since 2017 and in the private sector since 2021.
Reaction from the contracting sector
The U-turn drew a strong response from advisers and contractor groups who had viewed the September repeal announcement as a stunning piece of good news for the beleaguered contracting sector.
Many argued that the short window between the two statements created even more uncertainty for clients already struggling to understand the off-payroll rules.
Others said the reversal leaves long-standing issues around reasonable care, blanket assessments and CEST unresolved.
For now, the position is clear: the off-payroll rules remain in place, and the Government has provided no indication that a further reform or simplification will be revisited in the near future.