Update: The information in this article is out of date. For the latest on IR35, visit our IR35 advice.

IPSE (the Association of Independent Professionals and the Self-Employed) has praised the Chancellor’s announcement that the 2017 and 2021 reforms to IR35 are set to be scrapped from April 2023.

Andy Chamberlain, Director of Policy at IPSE said: “We are delighted that the new Chancellor agrees with what we have been saying for years – that the 2017 and 2021 reforms create unnecessary complexity for contractors and businesses. It is with huge relief that we welcome this dramatic shift in government thinking”

“As delighted as we are with the news, we remain concerned that the underlying IR35 rules will stay in place, and we hope to work with the government to make further progress on this issue in the weeks and months ahead.

“But for now, this is a watershed moment and will be a tremendous boost to thousands of contractors who have been unfairly penalised by these damaging rules.”

The reforms to the off-payroll working rules (IR35) made hiring organisations responsible for determining the tax status of contractors – either ‘employed’ or ‘self-employed’. This applied to public sector hirers from April 2017, and private sector hirers from April 2021, making them liable for an engagement’s tax bill if the status is assessed incorrectly.

Contractors whose engagements are deemed to be ‘inside IR35’ by their clients are required to receive their earnings via a payroll – often through an umbrella company at the request of their client – rather than on a self-employed basis through their limited company.

The announcement that the 2017 and 2021 reforms are to be repealed means that from 6 April 2023, contractors will once again be responsible for assessing the tax status of their engagements, as was the case pre-reform. However, with this responsibility also comes the associated tax liability if HMRC disagrees with an engagement’s status.