Jeremy Hunt has scrapped plans to reform off-payroll working rules (IR35) days after replacing Kwasi Kwarteng as Chancellor.

IR35 rules apply to contractors that operate through a limited company. Currently, a contractor’s IR35 status is assessed by the contractor’s client, but Kwasi Kwarteng’s now infamous mini-budget included plans for contractors to determine their own IR35 status from April 2023.

Jeremy Hunt, who replaced Kwasi Kwarteng after weeks of market uncertainty, has now cancelled these plans. This means that a contractor’s IR35 status will still be assessed by the client after April 2023. 

Miles Grady, director of Umbrella.co.uk, said: “Along with many of our clients, we’re disappointed to learn that the new Chancellor will roll back on what would be a positive change for contractors.

“IR35 changes introduced in the public sector in 2017 and the private sector in 2021 are too complicated, and they make it harder for organisations to access the best flexible labour. We hope the Chancellor will revisit these IR35 rules soon.”

The 2017 and 2021 IR35 reforms were originally introduced to tackle tax avoidance by self-employed workers. Kwasi Kwarteng said that putting power back in the hands of contractors would “minimise the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules”.

The new Chancellor announced he would cancel the IR35 plans as part of a summary statement to the media, ahead of a statement in the House of Commons due on Monday afternoon. He also confirmed that the government would not be moving forwards with planned changes to Income Tax brackets, Corporation Tax, Alcohol Duty, and VAT-free shopping for visitors to the UK.

Jeremy Hunt did confirm that plans to reduce National Insurance Contributions and rates of Stamp Duty would go ahead.

However, he also confirmed that government energy support package would be scaled back, with a cap on household rates for gas and electricity now set to end in April 2023, rather than October 2025 as originally planned. He announced a treasury led review into how they would support energy prices beyond April 2023, with support for businesses targeted at those most affected.

In his speech, the Chancellor said “it was not right to borrow to fund tax cuts” and emphasised the sustainability of public finances in the face of volatility on international markets.

Politically, the move has been interpreted as a Government trying to regain economic credibility following a series of unfunded tax cuts by the previous Chancellor. Markets reacted positively to the move with government borrowing costs falling and the value of the Pound increasing.

For more information about IR35 and how it affects you, speak to a member of the team today. Call: 01625 544 460.