Kwasi Kwarteng committed to simplifying the IR35 rules, which have “added unnecessary complexity and cost for many businesses”, he acknowledged during his mini-budget speech earlier today (September 23).
“So, as promised by the prime minister, we will repeal the 2017 and 2021 reforms,” he announced.
These reforms will be revoked from April 6 next year, after which UK workers who provide their services through an intermediary, for example a personal services company, must determine their own employment status.
Read more: PDA: Locums may assist contractors in HMRC IR35 probe but ‘no obligation’ to do so
The amount they are taxed and their national insurance contributions will change accordingly, according to the Treasury.
This effectively means that the “onus” is once again on locum pharmacists to determine their own tax status, Silver Levene accountant Vinku Shah told C+D.
Less confusion and economic savings
The 2021 rule was introduced to ensure that individuals who are working like employees but through their own limited company pay the same income tax and national insurance contributions as others who are directly employed by a company.
When the rules were enforced, companies had to carry out status determinations for every locum pharmacist who they engaged with, Mr Shah explained.
But scrapping this rule removes the “ambiguity and confusion that it caused” and will be “welcomed news by both locum pharmacists and pharmacy contractors”, Mr Shah said.
“That is also a large cost saving that has been taken off. It is going to be very helpful [as] costs are going up in every aspect of the business, it’s becoming more and more difficult to keep costs down where your income is not increasing by that level,” he added.
The scrapping of the 2021 reform might also encourage some locums to reopen their limited companies, which many decided to close for fear of losing out due to IR35 rules, Mr Shah speculated.
“It’s advisable for local pharmacies to consult their accountants and tax advisors for advice” in light of the upcoming changes, Mr Shah suggested.
He also welcomed the chancellor’s decision to cancel the planned increase in national insurance contributions, which again is likely to save costs for both pharmacy owners and locum pharmacists.