While the Government has performed a U-turn on scrapping the top rate of Income Tax, other measures introduced by Chancellor Kwasi Kwarteng during his September mini-Budget, such as the reform of IR35, have been welcomed.
In addition, the so-called sunsetting of EU laws has led to the Government introducing the Retained EU Law (Revocation and Reform) Bill, which is likely to have a major effect on employment law.
What is IR35?
IR35 was introduced in 2000 to deal with a form of tax avoidance known as disguised remuneration.
This is where individuals attempt to avoid paying the full rate of Income Tax and National Insurance Contributions (NICS), by providing their services through an intermediary or contractor, such as a Personal Service Company (PSC).
Under the initial IR35 rules, the intermediary was required to determine the status of the person providing the service. However, this person was typically the sole director of the PSC, often the intermediary.
However, this was amended in 2017 to cover public companies and in 2021 for private sector companies, so that it became the responsibility of the business or organisation engaging the services of these individuals or contractors, to determine whether they are inside or outside of IR35 for taxation purposes.
What has changed with the mini-Budget?
The Chancellor has announced the repeal of 2017 and 2021 changes to the IR35 and off-payroll rules. This latest change places the responsibility for the determination of IR35 status and the tax liability, back with the contractor and away from the business engaging their services.
When will the changes to IR35 take place?
The repealing of the 2017 and 2021 IR35 reforms is to take effect in April 2023.
EU regulations to be ’sunset’
All EU-derived legislation is to be ’sunsetted’ from the end of 2023. According to the Government, this means that “any retained EU law that remains in force after the sunset date will be assimilated in the domestic statute book, by the removal of the special EU law features previously attached to it”.
The only exceptions will be where areas are specified in regulations made by a minister or devolved authority. Important areas which may be affected in the Retained EU Law (Revocation and Reform) Bill include the Working Time Regulations, Transfer of Undertakings (Protection of Employment) (TUPE), part-time and fixed-term worker regulations, and agency workers.
Those rights have provided protection to workers for the last 50 years and reforms could also include health and safety regulations, holiday pay and parental leave. Some discrimination areas could also be affected such as equal pay for equal work, but it is not yet clear what will replace current laws.
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