With Chancellor Jeremy Hunt announcing a list of U-turns to the majority of the mini-budget on Friday, does this mean IR35 is being scrapped?
IR35 was introduced by HMRC in 1999 with the aim of clamping down on individuals working in a manner similar to an employee but under the guise of a limited company. When freelancers operate through a private company, they generally pay lower income tax and don’t have to pay national insurance. Previously it was up to individuals to assess whether they fell under IR35 however, since reforms in 2017 and 2021 the onus has been on businesses and public authorities to decide the status of their contractors.
You may be affected by these rules if you are:
- A worker who provides their services through their intermediary (normally their own private company),
- A client who receives services from a worker through their intermediary,
- An agency providing workers’ services through their intermediary.
If the rules apply, income tax and employee national insurance contributions must be deducted from fees and paid to HMRC. Employer national insurance contributions must also be paid.
Are IR35 rules being scrapped?
The September 2022 mini-budget said that these changes would be reversed. The then Chancellor Kwasi Kwarteng proposed that, with effect from 6 April 2023, irrespective of whether the contractor was working in the private or public sector, the contractor would once again be responsible for determining their own employment status and paying the appropriate amount of tax and NICs under IR35.
Mr Hunt has now confirmed that this change will not take effect and the status quo will continue after April 2023. The government’s U-turn on IR35 is mainly aimed at saving the Treasury money and returning stability to the financial markets.
We don’t see the pinball treatment of IR35 rules as impacting mortgage options for such clients at this moment in time however their needs have always been slightly more complex than those earning income in a standard self-employed or employed way. We will continue to support contractors who operate in this manner as long as their tax arrangements are legitimate and legal and ensure that they obtain the most suitable mortgage terms possible.
Chris Lees, Mortgage and Protection Director at Resolve Financial Solutions.