The treasury has today announced that reforms to IR35 will be abandoned from 6 April 2023.

This means that contractors working via an intermediary will be responsible for paying their tax and national insurance contributions.

The move reverses reforms first made in 2017 for the public sector and then expanded into the private sector in 2021.

They saw responsibility for the working out if a contractor is employed or self-employed fall onto the shoulders of the end client rather than the contractor.

The government says that ditching these rules will help make the tax system simpler.

IR35 Shield chief executive Dave Chaplin says: “These onerous reforms were never going to work and were flawed from the start. The recent Court of Appeal Atholl House case further highlighted the structural deficiencies of the legislation.

“The new version of IR35 has simply served to pour glue on the economy and prevent growth. 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. “

And Professional Passport chief executive Crawford Temple comments: “Implementation of these new rules has cost companies millions of pounds so it is disappointing that the warnings were not heeded before pressing ahead.

“It has taken up until now for the government to acknowledge this. However, the government urgently needs to press HMRC to provide detailed guidance, on the back of today’s announcement, relating to the application of the managed service company (MSC) legislation.

“I would go further and suggest a review of both IR35 and MSC Legislation needs to be carried out urgently so that contractors are not inadvertently operating under schemes that would apply full PAYE to their income from April. IR35 is flawed and the government should start with a clean sheet of paper and design a strategy for the modern workplace.”