Skilled workers to benefit from scrapping of IR35 tax rule

A shake-up in company payroll rules announced in the mini-Budget last week is set to provide a major jobs boost for skilled workers, such as computer consultants and those in the financial sector, say experts. 

The scrapping of IR35 legislation – which forces many previously self-employed workers to be treated as employees by companies wanting to use their services – takes place in April. 

It is expected to have a dramatic effect in areas such as IT consultancy, where workers often prefer to hire out their skills to a variety of different firms and not just one main employer. 

Boost: The scrapping of IR35 legislation – which forces many previously self-employed workers to be treated as employees by companies – takes place in April

There will also be a knock-on effect for accountants, and tax and legal experts in finance, who will be drafted in to redraw contracts for employers and the self-employed needing to address the rule changes. 

The legislation has cost the industry millions of pounds to set up in the past few years. Seb Maley, chief executive of tax consultant Qdos Contractor, says: ‘This is music to the ears for those who do not wish to be tied to a desk with a single nine-to-five job, but want the flexibility of working for themselves and a variety of others. It also relieves companies of the legal and financial responsibility of treating them as employees.’ 

Under IR35, contractors working for a company often have the same taxes deducted from earnings as an employee, even if they do not always have the same employment rights, such as sick leave and holidays. It was introduced for those working in the public sector in 2017 and the private sector in 2021. 

Penny Simmons, legal director for law firm Pinsent Masons, says: ‘Ripping up the rule book is going to have a positive impact for many businesses across the country – but many millions of pounds will have to be spent on rewriting the compliance regulations yet again.’ 

Earlier this year, a report by spending watchdog the National Audit Office pointed out that ‘significant investment’ was required to ensure companies were compliant with IR35 rules. But the new Chancellor, Kwasi Kwarteng, said that repealing the IR35 legislation was not just about saving companies money, but about removing complexity from the tax system. 

Maley says: ‘This is a real statement of intent from the Government to support smaller, often one-man-band outfits that do not always get listened to.’