This is the message that IR35 specialist companies are reminding business owners.

These changes will “redraw the boundaries” of the off-payroll rules, empowering more contractors to make IR35 status determinations and reducing administrative burden for businesses, according to Qdos, an IR35 compliance specialist. 

Coming into effect on 6 April [2025], the changes will see a reported 14,000 medium-sized businesses reclassified as small businesses – which will also “redraw the boundaries” of the controversial off-payroll working rules, Qdos said. However, other commentators are less optimistic about the impact of the changes.

Last 10 December, the government laid new regulations before Parliament, ‘The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024’ under Statutory Instrument number 2024/1303, exercising powers conferred the Companies Act 2006, enabling them to raise from 6 April this year the monetary size thresholds for micro, small and medium-sized enterprises.

The accompanying explanatory memorandum explained the primary aim was to simplify regulatory requirements and alleviate reporting burdens on businesses.

One small impact of the changes, explained in the Memorandum (5.14 and 9.6), was the impact on “the application of the off-payroll working tax rules, under Part 2 of the Income Tax (Earnings and Pensions) Act 20036, commonly referred to as IR35”, which was “expected to result in an Exchequer cost of approximately £20m per annum from 2026/27 onwards”.

“The changes are expected to free 14,000 businesses from the requirements of the off-payroll rules, putting potentially tens of thousands of contractors back in control of their IR35 status,” Qdos said.

Before the introduction of the off-payroll working rules, contractors were responsible for determining their IR35 status. In 2021 in the private sector, this responsibility was handed to medium and large businesses engaging these workers, which also became liable for non-compliance.

“Only in their engagements with small businesses do contractors remain responsible for determining IR35 status. As such, these changes will be welcomed by contractors as much as by businesses,” Qdos said. 

“These complex rules have proven troublesome for businesses to implement and manage, with many choosing to stop engaging contractors for fear of non-compliance. As a result, businesses will welcome this shifting of the goalposts just as much as contractors – who will now be back in control of determining their IR35 status among a wider pool of prospective clients,” said Seb Maley, Qdos CEO.

However, Dave Chaplin, CEO of IR35 compliance firm IR35 Shield, offered a less optimistic view. "Whilst reducing regulatory burdens is good for business, regarding the impact on off-payroll working, this regulatory change is negligible. The Treasury’s own figures show it will cost just £20m annually from 2026/27 – a reduction of a mere 1.1% of the reported £1.8bn tax collected as a result of OPW [off-payroll working].

“Let’s be clear: the number of contractors that this may benefit is minimal and the fundamental challenges with IR35 remain, continuing to impede the flexibility of Britain’s independent workforce.

“The off-payroll rules continue to force contractors into suboptimal quasi-employment models and place an unnecessary burden on UK enterprises.

“If Labour wants meaningful change that produces growth, they need to address IR35 itself, not just adjust reporting thresholds.”

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