Cautious welcome to chancellor scrapping IR35 reforms

Reforms to off-payroll working rules that impact locum vet professionals and practices have been scrapped by the chancellor.

But some in the veterinary professions have urged caution when interpreting the announcement – and called for the Government to provide more clarity on its future plans.

IR35 was introduced first in the public sector and later to private businesses to help HMRC to identify individuals that may be avoiding income tax and national insurance.

Contractors

Locum vets, which many in the sector rely on to plug staff shortages, are contracted by veterinary practices, but the individuals are engaged and paid through their own limited companies and do not benefit from benefits such as holiday and sick pay.

Under the reforms, onus for proving off-payroll work – or whether a locum was inside or outside of the IR35 rules – switched to clients, for instance vet practices contracting locum services.

Many argued the rules added extra bureaucracy to businesses and stress to off-payroll workers, and the chancellor has now said the reforms brought in during 2017 and 2021 – for public and private sectors respectively – would be repealed.

Statement

In his growth plan 2022 speech on 23 September, Mr Kwateng said: “We can… simplify the IR35 rules – and we will. In practice, reforms to off-payroll working have added unnecessary complexity and cost for many businesses.

“Of course, we will continue to keep compliance closely under review.”

Rich Casey, president of the VMG, welcomed the news, but said more information was now needed on what would happen next.

He said: “The IR35 rules were created to differentiate between ‘genuine’ contractors and ‘disguised’ employees in an effort to combat potential tax avoidance. Unfortunately, they can be difficult to understand and are a source of worry to many in the sector, mainly locums and, in particular, those who carry out regular locum work for the same practice.

“The VMG welcomes all measures that reduce the administrative burden on individuals and businesses in the sector, particularly during such uncertain and volatile times. However, until there is more clarity on Government plans, we urge anyone who may fall within the scope of IR35 rules to assess their situation carefully.”

‘Be careful’

Caution was also expressed by Justin Powlesland, director of JHP Recruitment, which is a leading recruitment agency in the profession.

He said: “I think we need to be careful, as I have spoken with many people who think IR35 has been scrapped. This isn’t the case, and what has actually happened is that the 2021 amendments have been abolished.

“This means that the responsibility for who determines whether a role is inside or outside IR35 has moved back to the locum, as it was pre-2021 amendments.

“Personally, I believe that this is great news for the veterinary industry and will give locums better choices again. Hopefully, locums will see more of the money that they earn and, therefore, we may see a reduction in the costs for clinics.”

Support

SPVS, meanwhile, said the legislation had created problems. Junior vice-president Ryan Davis said: “SPVS supports the new Government’s position on IR35. The IR35 legislation has created major employment pressures for large veterinary companies. The repeal will be welcomed as a way of simplifying the relationship between vet and practice across the profession, which can only be a good thing for well-being and efficiency.”

President Andrew Parker added: “Repealing IR35 will be an administrative taxation change for self-employed locums and employers. This will massively reduce the administration time for practices, which is a positive move. From the locum’s perspective, it will mean taxation is done at the end of the year and national insurance payments will be considerably less. Similar changes will occur for the employer.”