APSCo welcomes IR35 repeal in Chancellor’s Budget

“The Chancellor’s Mini Budget promised to be one that drives growth for the UK and it’s clear that the Truss administration is powering ahead with an extraordinary range of changes to boost the economy. The planned repeal in April 2023 of the Off Payroll legislation is a welcome move. APSCo has long called for a review of the measures which have dramatically reduced the flexibility of the skilled independent labour market since they were introduced in 2017 and 2021.

“Many of the proposals in today’s announcement will strengthen the appeal of highly skilled, professional flexible working in the UK which is long overdue. The planned changes to Income Tax from April 2023 – in particular the abolition of the top rate of income tax for the highest earners – and reversal on the planned increase in Dividend Tax alongside the IR35 repeal, will encourage more individuals back into the flexible labour market to drive growth at end-engagers.

“Having previously called for a reversal of the Health and Social Care levy – which APSCo correctly feared would only serve to drive recruitment, umbrella and PAYE agency worker costs up and exacerbate on-going skills shortages – we are pleased to see it has been scrapped. It’s also promising so see an intention from the Government to make the UK a global powerhouse once again, with the removal of the banker bonus cap likely to strengthen the country’s Financial Services sector.

“The plans for growth in specific investment zones is a move that we believe will have a significant impact on the country. However, while the measures announced today will help bolster growth, the lack of skills across the UK remains a cause for concern to achieve these ambitious aims. The changes to Universal Credit and unemployment benefits may drive more people into lower-paid jobs, but it is the high-skilled segment of the workforce that is lacking the resources needed.

“Plans to encourage over 50s back into work will help build skills across the UK, as will the plans to bolster the flexible workforce. However longer-term plans are needed that support broader skills development. There also needs to be complete coordination between education institutes, employers, industry bodies and relevant Government bodies to drive a long-term impact.

“We look forward to hearing more on the planned immigration review mentioned by the Chancellor, as well as measures to be introduced to support more over 50s back into work.”

How will this impact the procurement and supply chain interim market?

Jack Birch, Senior Manager of Procurement Heads’ Interim recruitment offering, believes the interim procurement and supply chain market will be even busier than it already is.

He said, “The interim recruitment market in the procurement and supply chain space has been exceptionally busy for the last six months and we anticipate seeing even higher demand for top calibre interim candidates, with the upcoming April 2023 repeal of the 2017 and 2021 IR35 reforms expected to reduce barriers within the flexible labour markets.

“Part of Procurement Heads’ professional contractor base are interims who, even in recent years and through the reforms, have been able to be selective about their mandates and therefore secured outside IR35-only assignments.

“Typically, these candidates represent the top interim talent at mid-to-senior levels, and as the reforms come into effect it’s likely that they will find more assignments now available to them, and similarly themselves become available to a wider pool of businesses.

“While we, therefore, expect day rates to increase for some of the top interim talent, the repeal of the IR35 reforms could also see some businesses paying less for skilled interim resources in certain circumstances.

“The repeals are likely to mean that organisations can secure more interims on an outside IR35 basis, where perhaps similar roles would’ve been forced inside IR35 in the past – sometimes simply due to ‘blanket inside IR35’ company policy. For instance, a company utilising the services of an interim on a typical £500-day rate may have instead had to pay £600-£700 to secure the candidate inside IR35, to help mitigate the PAYE tax impact and other changes to their preferred outside setup.

“With the repeal of IR35 reforms and the likelihood of more outside roles, this will result in more interims working outside IR35 again and therefore seeing more of the day rate directly, with the hiring company also then paying less overall in many instances.”

“Of course, this is a complex landscape and lots of factors will be at play here, so we will continue to map day rate fluctuations accordingly.”

Jack also believes more interims will join the market.

“A significant number of longstanding professional interims moved into permanent roles in recent years, often because of IR35 reforms – especially the 2021 ones – making the flexible interim market much more complex and less lucrative to work in.

“We expect to see many of these now look to move back into their preferred change and delivery-based interim remits as a result of the government’s announcement. I’m also confident that we’ll see more candidates making their first moves into the interim market, with its broadening appeal.

“The devil is always in the detail with IR35, and we must be careful to bear in mind that, firstly, these repeals do not come into effect until April 2023 for the new tax year, and, secondly, that IR35 itself is not going away altogether – just the reforms made in the last five years.

“We expect that the rules will revert to pre-reform status – with the individual contractor/limited company, rather than the ‘end user’, defining their own employment status in line with IR35 rules – but will understand more on exactly what format will replace the current regulations as these are announced in due course.”

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