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New PM pledges to review IR35

The race for the new PM came down to two hopefuls, former chancellor Rishi Sunak and current Secretary of State Liz Truss. And while they have both been touting their manifestos, one thing that made the employment industry ears prick up was Liz Truss’s promise to “review IR35”. 

But, now that Truss has been announced as the new PM, what might this mean for the controversial off-payroll legislation?

What is IR35?

IR35 is the UK legislation for off-payroll working which is designed to make it harder for contractors to work in “disguised employment” and benefit from lower tax and national insurance contributions (NICs).  

The reforms which happened in April 2021 shifted the responsibility for determining IR35 status from the contractor to the end hirer. Self employed contractors’ status must be correctly identified from the start of the project and any workers who are categorised as inside IR35 are treated as employees and are subject to the same tax and NIC as permanent employees.

Knee-jerk reaction

With hefty fines for companies who fail to comply with IR35 legislation, many employers responded by refusing to use contractors at all, this resulted in a rise of non-compliant umbrella companies, who provide end-hirers with an IR35 safety net. But many contractors found themselves working in “zero rights employment”, where they are taxed as employed but enjoy none of the benefits of employment including holiday pay. 

A government consultation which sought to decide whether tax and employment status should be aligned, thereby stopping zero rights employment, has recently ended, with the government confirming that they have no plans to make any changes in this regard.

Liz Truss and IR35

With rival Rishi Sunak at the helm when the IR35 legislation changes happened, it’s no surprise that Liz Truss seized the opportunity to take a stab at it. 

In a recent interview with a national newspaper, she said that IR35 was an attempt to treat the self-employed the same as big business, “But the fact is, if you’re self-employed, you don’t get the same benefits as being in a big company. You don’t get paid holidays, you didn’t get those benefits. So the tax system should reflect that more,” she said.

NIC reversal

Aside from the IR35 review, Liz Truss also pledged to reverse the National insurance increase of 1.25% which came into force in April 2022. In possibly one of the biggest attractions for Truss at a time when the spiralling cost of living is never far from the headlines, Truss proposed that she would scrap the Health and Social Care Levy which was the reason for the increase.

As a former qualified chartered management accountant, Truss said that as PM she would “…get more start-ups thriving, grow our economy and unleash opportunity here in Britain.”

 

Liz Truss has only just been announced PM, so it is too soon to really see what we can expect from the new head. But the employment sector is anticipating some much-needed changes which might impact the way agencies, contractors and umbrellas work together. 

We at JMK will keep our clients and contractors informed of any imminent changes, and in the meantime if you have any questions at all, don’t hesitate to get in touch.

 

HOW JMK CAN HELP YOU

Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions. 

We have evolved to provide a range of expert services; such as Funding, becoming a leading provider to the contracting industry.

We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.

With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.

Have a look at the wide range of services our Funding can provide to you and your business, it is far more than just payroll and finance.

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