June 2025 – The Labour government has indicated it has no plans to repeal the IR35 off-payroll working rules, confirming the controversial legislation will remain in place for the foreseeable future.
Parliamentary Response Signals Status Quo
A recent parliamentary question asking whether the government would return IR35 status determination to contractors received a response that focused on tax revenues generated by the reforms rather than any commitment to review or change the current system.
The Treasury response, delivered in early June 2025, cited HMRC estimates showing billions in additional tax revenues collected since the reforms were introduced, making clear the government views the off-payroll working rules as an important source of funding for public services.
The exchange followed a question submitted in late May 2025 that effectively asked ministers to consider reinstating contractor self-determination of IR35 status.
Revenue Protection Remains Central
The government's position consistently emphasizes revenue protection. Treasury responses to parliamentary questions about IR35 have repeatedly highlighted the substantial tax income generated by the off-payroll working rules, suggesting any reform would be viewed as reducing government revenues.
This focus on fiscal responsibility makes IR35 reform politically difficult for a government dealing with economic pressures and public service funding challenges.
The 2022 Mini Budget Shadow
IR35 remains politically sensitive following events in autumn 2022, when a short-lived government briefly announced plans to repeal the 2017 and 2021 reforms. That announcement was reversed within weeks amid broader economic turbulence and political upheaval.
The episode associated IR35 reform with fiscal instability, making it challenging for any government to revisit the issue without facing criticism about economic management.
Industry observers note that lobbying efforts for IR35 reform have met with consistent government resistance, with ministers showing little willingness to engage with proposals for changing the current framework.
Opposition Parties Take Different Stance
Outside government, several opposition parties have indicated support for IR35 reform or repeal.
Political parties not in government have made various commitments regarding the off-payroll working rules, ranging from pledges to review the legislation to proposals for complete abolition. These positions reflect growing frustration among contractors and business groups with the current system.
Recently formed political movements focusing on small business and self-employment issues have also made IR35 reform a central policy concern.
Contractor Sector Challenges
Industry research and contractor organisations have documented significant impacts from the off-payroll working rules since their introduction in the public sector in 2017 and private sector in 2021.
Reported effects include reduced contract availability, lower earnings for contractors, increased use of umbrella companies, and businesses implementing blanket inside IR35 determinations to avoid compliance risks.
Contractor Impact Documented
IPSE's IR35 Spotlight 2025 report documents the practical impact of the off-payroll working rules: fewer contracts, lower earnings, and growing instability across the contractor sector. Many contractors are being forced into umbrella companies, pushed to accept less favourable terms, or leaving self-employment entirely.
According to
IPSE's Freelancer Confidence Index (Q3 2024), 83% of contractors cited government tax policy relating to freelance working as detrimental to their business performance, while more than three-quarters cited government regulation related to hiring contract workers as damaging.
Business and Industry Concerns
Major business organisations have raised concerns about the administrative burden created by the off-payroll working rules. Trade bodies representing employers and recruitment agencies have highlighted compliance challenges and liability risks under the current framework.
Think tanks across the political spectrum have identified IR35 as a barrier to entrepreneurship and flexible working arrangements, though the government has not indicated these concerns will lead to policy changes
Practical Implications
For contractors currently operating under the off-payroll working rules, the government's position confirms the current system will continue without immediate change.
Medium and large businesses remain responsible for determining contractor IR35 status and issuing
Status Determination Statements. The compliance requirements, administrative costs, and conservative approach to status determinations that have characterizsed the system since 2021 show no signs of changing.
Small companies remain exempt from the off-payroll working rules, with contractors engaging with qualifying small businesses continuing to determine their own status.
Looking Ahead
With a general election potentially several years away, and the current government showing no interest in revisiting IR35 legislation, contractors and businesses face an extended period operating under the existing framework.
The government's emphasis on tax revenues generated by the reforms, combined with the political sensitivity created by 2022 events, suggests IR35 will remain unchanged regardless of pressure from opposition parties, industry bodies, or contractor organisations. For the contractor sector, this means adapting to a system widely viewed as flawed but politically untouchable. The gap between government policy and industry calls for reform appears set to continue.
