Off-payroll repealed – but IR35 still lives after April 2023

On Friday, 23 September 2022, the new Chancellor, Kwasi Kwarteng, revealed the surprising news – the Governments intention to repeal the Off-payroll working reforms from April 2023. The Off-payroll rules were labelled as “IR35 Reform” and introduced in the public sector in 2017, and extended to the private sector in 2021, despite fierce campaigning from the Stop The Off-payroll Tax campaign.

This bombshell came out of nowhere and was unforeseen by industry experts, many of whom subsequently commented that it’s unheard of for a Chancellor to repeal Primary tax legislation without consultation.

However, reports on social media that “IR35 is dead” were misguided. Firstly, nothing has been repealed yet, and nothing will be repealed until the next Finance Act. Already, Tory Ministers are briefing that they may rebel against the next Finance Act if the pound falls below the dollar. At the time of writing, the pound against the dollar is sitting at only 1.05, a drop from 1.20 in only mid-August. It appears pound-dollar parity may be inevitable within weeks.

Secondly, the original IR35, the Intermediaries Legislation, will remain after April 2023. Dave Chaplin, CEO of IR35 Shield, says: “When you read the financial impact of the repeal in the Government’s Growth Plan document, you’ll see that there are six billion pounds worth of reasons why all rejoicing would be premature, and why all parties in the supply chain should not be complacent as we approach April 2023, nor beyond.

“Off-payroll working is still in statute, and though it is planned to be repealed in April 2023, the original IR35 will remain. IR35 is certainly not dead and will reawaken.”

[UPDATE: Register for a free webinar, today, by IR35 Shield – on the rules changing. Recording will be sent. =>]

Off-payroll working is repealed without consultation

“Anyone who tells you they knew Off-payroll was going to be repealed is either the Chancellor or is telling fibs!” says Chaplin. “As the mini-budget approached, the IR35 discussions were around whether another IR35 Review, promised by Truss during the Conservative leadership hustings, would even come to fruition. The astonishing repeal announcement was never on anyone’s radar.”

The move by the Chancellor does not align with how Off-payroll was initially implemented, nor does it align with the principles in the HM Treasury and HM Revenue and Customs Tax Consultation Framework, published in 2011, only ten months after the Conservatives won back power in May 2010. The framework states that:

“The Government recognises the importance of engaging fully with individuals, practitioners, businesses and other organisations in the development of tax policy. The best public engagement allows the Government to explore, develop and test new ideas to improve the tax system, and to ensure that change is well targeted and its likely impacts are understood. Better scrutiny of tax legislation, through early exposure of drafts, will help ensure that legislation is fit for purpose.”

The Tax Consultation Framework details a five-stepped process to introduce fundamental tax changes, which includes engaging interested parties and carrying out “at least one formal, written, public consultation in areas of significant reform.”

Chaplin explains the irony of what’s happened: “Many commentators, including myself, have become quite cynical about Government tax consultations, saying they were a waste of time and essentially a lip-service process, where the Government ignores the concerns of the stakeholders and does what it wants anyway. Ironically, Government has side-stepped its framework, not even involving Treasury or HMRC, and done what it wants anyway.

“Whilst the heavily criticised Off-payroll reforms were unpopular, the approach to making tax policy, on a whim, is itself populist and may unnerve firms seeking to invest in the UK.”

“That aside, the stark reality was that the Off-payroll working rules were not working properly and were detrimental to UK business. They needed to be fixed or ditched.”

What led to Off-payroll being repealed?

The Off-payroll working reforms were not a success. Had the Government listened to the voices of the Stop The Off-payroll Campaign and voted for Amendment 20 in July 2020, it may have had a chance. Instead, the valid concerns were ignored, the flawed legislation was rushed into statute, and no amount of Treasury spin was going to combat what then happened.

In July 2021, Governmental departments published accounts that revealed the absurd outcomes of HMRC Off-payroll enforcement in the public sector. The Department of Work and Pensions (DWP) was handed a tax bill by HMRC for £88m over incorrect IR35 determinations. These lousy news stories continued, and in February 2022, the National Audit Office (NAO) reported that the total tax bills of Government departments to date due to Off-payroll non-compliance were £263m. These government departments were educated by HMRC’s Off-payroll guidance and teams and used HMRC’s Check Employment Status for Tax tool. The NAO also highlighted their concern over the legislation’s lack of an offsets provision, resulting in contractors paying zero tax.

Because of a structural flaw in the legislation, the Treasury would lose millions of pounds whenever HMRC enforced the reforms in the public sector. This was because of a lack of an Offsets mechanism in the statute, an issue HMRC had known about for almost two years but done nothing material to address. The Public Accounts Committee were then alerted to this issue by Dave Chaplin, who submitted evidence to their enquiry into the Off-payroll reforms.”

The public accounts committee (PAC) then quizzed Jim Harra, the CEO of HMRC, on the truth of the offsets issue in May 2022, who admitted, “I’m afraid that is the case.” Oddly, Harra was unaware that HMRC was attempting to deal with the offsets issue in that same session and that HMRC had already formed a working group to seek resolution (see item 3 in IR35 forum minutes from 17 March 2022). Harra’s unawareness caught him off guard, telling the Public Accounts Committee, “From our point of view, it is very important that there is an incentive on the engager to get these determinations right. The fact that they can end up liable for the tax if they do not take reasonable care is a key incentive in the regime to encourage them to get this right.”

The Financial Times subsequently reported this matter under the headline “Contractors in the UK can escape tax if new hiring rules are misapplied.” HMRC then admitted that “it had been working with stakeholders to identify options to address the issue.”

Two months later, on 26 April 2022, matters worsened for the Off-payroll working policy due to the IR35 case of Atholl House at the Court of Appeal. Whilst the case was remitted back to the lower courts due to an error in law found, there were five material legal issues HMRC lost on, signalling a significant blow to their longstanding view of how they believed they and others should determine IR35 status.

HMRC’s now debunked views infected the validity of their Check Employment Status for Tax (CEST) tool. A 40-minute CEST webinar on 21 June 2022, by Dave Chaplin, published on IR35 Shield, forensically examined the underlying source code and logic of CEST and compared it to the Court of Appeal’s binding law. The analysis objectively proved that when CEST delivers an “Outside IR35” result, it does so without conducting a full multi-factorial assessment – contrary to binding law from the Court of Appeal.

Then, on 9 August 2022, yet another set of Government accounts, this time for HS2, revealed a further £9.5m IR35 blunder, which ContractorCalculator reported under the headline that contractors could be receiving an £8m tax windfall.

Forty-five days later, the Government signalled its intention to repeal the Off-payroll working reforms from April 2023.

How should parties prepare for Off-payroll repeal?

Chaplin wryly remarks: “I’m old enough to remember as far back as 17 March 2020, when the then Chief Secretary to the Treasury, Steve Barclay, stood up in the House of Commons on the day the proceedings for the Finance Act for 2020 began, and announced there would be one year’s delay. Many businesses were unhappy, having already spent considerable sums preparing for the roll out the following month.”

Chaplin is right to signal caution. The repeal of the Off-payroll rules is currently published intent but not in the statute. The next Finance Bill will need to be drafted, laid before the house for First Reading, and then travel through Parliament in the usual way. Initial drafts for an Autumn Bill are likely to be seen around the start of November, with it reaching royal assent sometime in February 2023. Until then, Off-payroll is still binding law.

Chaplin provides a warning, based on this experience: “From everything I learnt from six years of political campaigning and my knowledge from Erskine May on Parliamentary procedures, nothing is guaranteed until it reaches Royal Assent.

“For now, carry on as normal, but have a transition plan ready.”

Keep updated on Off-payroll + Help with Transition Planning

LinkedIn (Free): Dave Chaplin is very active on LinkedIn, publishing daily on IR35 and Off-payroll matters. We recommend you follow Dave on LinkedIn to keep up to date.


Dave Chaplin can provide bespoke consultancy to firms to assist with the complex nuances associated with what could be the transition from Off-payroll back to the original Intermediaries Legislation. To seek help, please email IR35 Shield at


Dave Chaplin will also be assisting all current members of IR35 Shield for Contractors. You can sign up today to get the help you need as we head to April 2023.

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