Chancellor Kwasi Kwarteng delivered his Mini-Budget 2022 today, which pledged to repeal the 2017 and 2021 Off-Payroll (IR35) reforms.

Kwarteng’s speech, titled ‘The Growth Plan 2022 speech’, addressed how it can simplify the IR35 rules.

“In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses,” Kwarteng said. “So, as promised by My RHF the Prime Minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.”

The IR35 Reforms were rolled into the public and private sectors in 2017 and 2021, respectively. The reforms will no longer apply from April 2023. Instead, the original rules will remain, and contractors will be responsible for assessing their own tax.

The reforms aimed to stop disguised remuneration schemes; however the reforms have received criticism.

Prime Minister Liz Truss had promised to review IR35 legislation.

Dave Chaplin, CEO of tax compliance firm IR35 Shield said, “Today, contractors and businesses will be celebrating as Liz Truss and her government have not only kept to their promise but gone further and repealed a legislation that has had a damaging effect on business and contractors’ livelihoods for the past five years.”

“The new version of IR35 has simply served to pour glue on the economy and prevent growth,” Chaplin added. “The Chancellor has done the right thing and removed an unnecessary burden for firms of trying to solve a complex riddle every time they hire a worker.”

Seb Maley, CEO of IR35 expert Qdos, said, “Repealing IR35 reform is a huge victory for contractors. The changes have created havoc for hundreds of thousands of independent workers, along with the businesses that engage them. The fiscal changes announced today are likely to go down as some of the most pro contracting in memory.”

“The government mustn’t waste time, though,” Maley added. “The last thing contractors and businesses impacted by IR35 need is uncertainty. A clear and robust roadmap for reversing IR35 reform in both the public and private sectors is needed.”

Crawford Temple, CEO of Professional Passport said 'the government urgently needs to press HMRC to provide detailed guidance, on the back of today’s announcement, relating to the application of the MSC (managed service company) Legislation.'

The Chancellor also addressed strike action.

“At such a critical time for our economy, it is simply unacceptable that strike action is disrupting so many lives,” Kwarteng said. “Other European countries have Minimum Service Levels to stop militant trade unions closing down transport networks during strikes. So we will do the same. And we will go further. We will legislate to require unions to put pay offers to a member vote, to ensure strikes can only be called once negotiations have genuinely broken down.”

The Chancellor also announced support for energy bills for both businesses and consumers.

Kwarteng also announced income tax cuts and business tax cuts, as well as the scrapping of the bankers’ bonus cap.

Furthermore, the government introduced a Bill that means the Health and Social Care Levy will not begin next year as it will be cancelled. The increase in Employer National Insurance Contributions and dividends tax will also be cancelled. Meanwhile, the interim increase in the National Insurance rate, brought in for this tax year, is also being cancelled.

“And if a business hires a new employee in the tax site, then on the first £50,000 they earn, the employer will pay no National Insurance whatsoever. That is an unprecedented set of tax incentives for business to invest, to build, and to create jobs right across the country,” Kwarteng said.

“A strong UK economy has always depended on a strong financial services sector,” Kwarteng said. “We need global banks to create jobs here, invest here, and pay taxes here in London, not Paris, not Frankfurt, not New York. All the bonus cap did was to push up the basic salaries of bankers, or drive activity outside Europe. It never capped total remuneration, so let’s not sit here and pretend otherwise. So we’re going to get rid of it.”

Kwarteng also announced that the UK will automatically remove EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law. Furthermore, the Mini-Budget speech also announced the creation of new investment zones.

“We will liberalise planning rules in specified agreed sites, releasing land and accelerating development,” Kwarteng said. “I can confirm for the House that we’re in early discussions with nearly 40 places like Tees Valley, the West Midlands, Norfolk and the West of England to establish Investment Zones.”

Neil Carberry, Recruitment & Employment Confederation CEO, said, “Putting business at the heart of delivering prosperity for the UK is always the right call, and the Chancellor’s focus on this will have landed well with employers all over the country. Reducing the counter-productive rise in employer National Insurance – a tax on creating jobs and paying people more, that falls heavily on the sectors most affected by the pandemic – is wise.”

“And ditching the botched changes to IR35 – the rules on how temporary contractors are paid - is also a huge help,” Carberry said. “These have been big REC campaigns, and we welcome today’s announcements. The changes will provide many businesses with much needed relief, when taken into the balance with short-term support on energy bills.”

Carberry added that “there is hard work to do on replacement rules, and in some cases little time to do it.”

On its strike action announcement, Carberry said the REC is sceptical about further regulating the process of employers negotiating with trade unions in workplaces, “as this could lengthen disputes even more.”

“We need a better workforce plan than that – and recruiters are ready to help deliver one,” Carberry said. “And that workforce plan needs to sit alongside a fiscal plan that the markets can believe in. Over the next few weeks, we will be looking for the government to set out its approach to ensuring that the books can be balanced, recalling that public services matter. So much of our (economic) inactivity issue is driven by long-term sickness that requires a strong NHS for it to be resolved.”

Julia Kermode, founder of IWork, said “The raft of measures announced are unprecedented. From repealing IR35 reform to scrapping the Social Care Levy and ditching the incoming Corporation Tax rise, individuals working through their own limited company will not forget the mini Budget.”

“My worry, however, is that many of these tax cuts overlook the lower earning self-employed,” Kermode said. “The government must go further for gig economy workers and temps who continue to struggle to make ends meet. If the pandemic taught us anything about the labour market and policy, it’s that one size doesn’t fit all and that tailored support is needed for all workers, not just employees.”

Fred Dures, founder of specialist payroll auditing provider PayePass, said, “While the tax cuts announced will certainly help many businesses during the cost of living crisis, I can’t help but feel that the Chancellor has missed a trick. Tax cuts will be welcomed by millions, but the issue of tax avoidance schemes – which continue to threaten freelancers and contractors, along with recruiters and end-clients – deserved focus in the Mini-Budget.”

“The government have often promised that the umbrella industry will be regulated – key if tax avoidance schemes are to be stamped out once and for all – but we’re still waiting,” Dures said. “Until this happens, additional funding is needed to put a stop to this illegal practice that poses a big risk to the temporary labour market. By not committing funding, the Chancellor has missed a golden opportunity to increase tax revenue. This is because tax avoidance schemes significantly reduce the amount of tax collected by HMRC.”

Unite general secretary, Sharon Graham said, “This Mini-Budget is unashamedly a budget for the rich, big business and the city, highest earners’ tax slashed, corporation tax slashed, investment bankers’ bonuses let rip. Billionaires and city bankers will once again be considering which tax haven they will stash their money in, whilst millions of ordinary families continue to struggle to make ends meet. If there are billions of pounds available to spend then the best way to help the economy would be to give public sector workers a pay rise.”

RMT (The National Union of Rail, Maritime and Transport Workers) general secretary Mick Lynch said, “The government should be working towards a negotiated settlement in the national rail dispute, not seeking to make it even harder to take effective strike action. RMT and other unions will not sit idly by or meekly accept any further obstacles on their members exercising the basic human right to withdraw their labour."