The Tories’ three IR35 replacement options — but contractors are right to be sceptical

As a contractor policy expert who was actually in the room when Andrew Griffith MP made his first speech as shadow chancellor on September 17th, I can tell you his ‘replace, not reform’ pledge on IR35 comes down to three real options — and contractors should weigh up all three before getting their hopes up. I’ll come to which of the options that we, the UK’s self-employed body, are most interested in later on, writes Josh Toovey, head of policy and research at IPSE. First, we deduce that “replace IR35”  puts three models on the table:

1. Old IR35:  “Replace” IR35 could mean that only the Intermediaries legislation (2000) remains on the statute book, as the Tories signalled in 2022 was their preference.
2. OPW Light: The main IR35 framework of 2017/2021 gets replaced with a more frictionless, stripped-down version of the off-payroll working rules.
3. New IR35: An entirely new determination of ‘genuine self-employment’ is created, and it might be the creation of the two advisers whom Mr Griffith has appointed to find IR35’s replacement, Robert Colvile and Craig Mackinlay.

Why does the wording of Andrew Griffith’s IR35 pledge matter?

The wording is deliberate, and it’s the most direct pledge that a Conservative shadow chancellor has made on IR35 in recent years.

Although we recommend self-employed contractors still take the ‘replace IR35’ pledge with a pinch of salt, it’s a step up from the Conservative Party’s previous positioning on the disguised employment rules, at least of late.

Griffith’s speech — which ContractorUK covered yesterday with reaction from advisers invited to his policy meeting — was delivered to a Tottenham technical college, where he told the room that many individuals would have trained inside the likes of before becoming self-employed.

Turning to IR35, Mr Griffith said: “The next Conservative government will replace IR35, not reform it, not review it, but replace it with a new system that respects the right of the self-employed to choose their status and only prevents actual abuse.”

The shadow chancellor also pledged to halt the rollout of Making Tax Digital (MTD), and called on chancellor John Healey to do the same — use the Autumn Budget in October 2026 to halt MTD (“Making Tax Difficult,” Griffith called it).

How long has IR35 been an issue for Griffith?

Griffith’s track record on IR35 is worth checking against his party’s September 2026 ‘replacement’ pledge.

He talked last October about “looking again at reforming” IR35, and Tory party leader Kemi Badenoch was still using the word “reforming” — in relation to IR35 — as recently as this month.

Dropping both “reform” and “review” from his speech on Thursday, and using “replace” instead, is a clear shift in tone from the top of the Conservative Party.

From the perspective of our members, a commitment to replace IR35, rather than tinker with it again, is the type of ambition that they’ve been calling for.

Why are the Conservatives being asked to fix rules they wrote?

However, let’s be clear: the off-payroll working rules aren’t someone else’s system that the Conservatives are offering to clean up.

When they were in power, the Conservatives created the off-payroll rules for the public sector in 2017 and then took this reform of IR35 into the private sector in 2021.

Making Tax Digital was legislated for on the Tories’ watch too.

Therefore, contractors can be forgiven for raising more than an eyebrow at a party asking to be trusted with fixing rules that it wrote itself.

What are the three lead options for IR35’s replacement?

In trying to work out what his “replace” IR35 pledge signals for contractors, we’ve deduced that, at this stage, Andrew Griffith MP is surely contemplating at least three models.

Option 1: Old IR35

A return to only Chapter 8 of Income Tax (Earnings and Pensions) Act 2003 — the pre-2017 rules on IR35, under which a contractor’s own limited company assesses its own IR35 status. So-called ‘old’ IR35 is in play today only for contractors with ‘small company’ clients.

Removing the off-payroll working rules (Chapter 10 of ITEPA) and leaving only Chapter 8 in its place is the model briefly promised to the House of Commons at the Tories’ 2022 mini-budget.

We acknowledge that this IR35 reform announcement was dropped just weeks later by then-Chancellor Jeremy Hunt, but, notably, Griffith was inside the Treasury at the time it was mooted.

Option 2: OPW Light

A retooled version of the in-force Chapter 10 framework.

These are the current IR35 rules in both the public and private sectors, and the rules put the IR35 status decision with the engager, in the form of a Status Determination Statement.

While we envisage that the engager, not the contractor, being the IR35 status decision-maker would be retained under this model, the subjectivity that causes so much friction gets stripped out.

Option 3: New IR35

This is the IR35 replacement model that Andrew Griffith’s own phrasing in his speech edges closest towards.

Option 3 is a genuinely new IR35 test built around the self-employed having more say over their own status.

Potentially stemming from the work of freshly appointed Robert Colvile and Craig Mackinlay, this brand new IR35 model would represent a bigger departure from anything currently on the statute book.

Who decides between the three IR35 replacement options?

The Tory task force for small business (which Griffith announced last week in his speech) is the body that will decide between these three IR35 replacement models.

Recommendations from Colvile and Mackinlay, pending approval from Griffith and Badenoch, are what contractors should wait for before any fretting over their working practices.

What else will the Tory small business task force target?

Griffith said on Thursday September 17th 2026 that, under a Tory government, he’d pause digital tax accounts. He called John Healey to do it first next month at Budget 2026.

MTD for Income Tax pulls in sole traders on turnover as low as £20,000 from April 2028, people running very small operations on thin margins, and asks them to file four digital updates a year with HMRC, on top of their annual return. That’s a real cost, in software and in time, landing hardest on exactly the businesses least able to absorb it. Pausing the MTD rollout while that burden gets looked at properly is a sensible ask.

The takeaway

The sentiment behind the Tory pledge to replace the IR35 off-payroll rules is welcome. Likewise, a pause on the next phase of MTD would give hundreds of thousands of sole traders the breathing room that they need.

However, both are still pledges from the opposition, made by the party that legislated the rules it’s now criticising.

Nonetheless, out of the three IR35 replacement models on the table, our preference as the UK’s self-employed body would be for Option 1. Or Option 3 — but not OPW Light. With Lord Mackinlay and Robert Colvile’s task force only just about at the scoping stage, it actually remains to be seen, because it’s unknown what that third ‘IR35 option’ will look like for contractors, in practice.