Contractor trends for 2023: IR35 and off-payroll

Two reports in as many days have informed us HMRC’s work with CEST is far from over, as necessary “improvements” amid ongoing “difficulty” for users are being made (HM Treasury), to a tool that has created “much confusion” and “additional costs for businesses” (ABAB).

So, with understandable concern, you might wonder what’s in store on the IR35/off-payroll front in 2023.

Well here, exclusively for ContractorUK, we’ve identified six IR35 trends that are noticeable now and which will invariably still rule the status space next year, writes Kate Cottrell, co-founder of Bauer & Cottrell.

1. Mini-Budget’s IR35 repeal awoke clients from risk-aversion slumber

Despite Mini-Budget 2022 moving to cancel the 2017 and 2021 reforms to IR35, we are currently back where we were – with the reforms in the public sector and private sector remaining in force.

But it is clear that many medium and large organisations in both the public and private sectors are now not so risk-adverse, and are willing to work with IR35 specialists to find a solution to their need to attract the best talent.

2. Consultancy usage to continue

No doubt we will see further growth of the “small” consultancies in 2023, and no doubt there will be many that get the set-up wrong, in terms of bypassing the off-payroll rules.

Some clients will of course turn to the big consultancies, but in these difficult times, budgets are key, indicating there will be a move away from the very large players, as the consensus is that they cost far too much.

3. Gripes and groans over MSC, PSL, brollies, will persist 

Umbrella Companies, just like accountants that may be MSC providers, will continue to be in the spotlight from HMRC, and from industry players. Similarly, Preferred Supplier Lists (PSLs) will keep grating many. All three have received some extremely bad press and there’s no signs that this glare will let up next year.   

4. Skilled? You’re an IR35 shot-caller

Contractors in IT but in other industries too, who have the right skills, are, and will continue to be in high demand in the labour market. But more than that, these sought-after contractors can call the shots on off-payroll and IR35. We’ll see that play out in 2023 too.

5. Officialdom goes back to not getting it

Despite raised hopes from a recent HM Treasury boss finding fault with the off-payroll rules (“unnecessary complexity and cost for many businesses”), HMRC and HMT will continue to be criticised by all and sundry for all things IR35/Off-payroll -- including the CEST tool. 

That said, in line with the two reports cited at the outset, I expect to see some developments to sort out the issues, not least with off-sets and of course the dreaded CEST.

6. Hunt caught between a rock and a hard pledge

If chancellor Jeremy Hunt is to fulfil his vision of the UK being the “next Silicon Valley,” as he said at Autumnn Statement 2022, changes have to be made to the off-payroll and IR35 rules. Watch this space.