EU law and IR35 what’s coming next?

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Abolition of EU retained law- should we be worried?

We can all recall the UK’s ground-breaking exit from the EU on 31 January 2020. One of the key topics on the negotiation table since that time has been employment law rights.

In September 2022 the government introduced the Retained EU Law (Revocation and Reform) Bill 2022-2023 which progressed through its second reading on the day Rishi Sunak was announced as the new Prime Minister. If the Bill is implemented, it will remove the special status of  retained EU law by December 2023 unless a government minister decides to retain it.

Retained EU law is the EU law that applied when the UK was part of the EU and includes the following;

• Agency Worker Regulations 2010 – agency workers’ rights (pay, holiday, conditions etc);

• The Working Time Regulations 1998 – 48-hour working week, paid annual holiday etc;

• Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000;

• Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) – rights of employees when transferring to a new employer.

• Maternity and Parental Leave etc Regulations 1999 – rights relating to unpaid parental leave

Whilst there remains some uncertainty (we do not agree that it’s appropriate to start talking about a bonfire of employment rights as others have chosen to do), it is highly unlikely that the government will completely revoke EU-retained legislation. Instead, it’s likely that the retained legislation will be restated or slightly amended. Our main concern is the timing and how much there is to get through in just over a year, but we will keep you updated on all changes.

Mini-budget – IR35 U-turn 

On 6 April 2021, the rules for engaging contractors who provided services through a personal service company changed. The responsibility for working out if IR35 applied moved from the contractor to the company.  This had a detrimental impact on the UK’s flexible workforce as many companies were understandably being risk adverse and insisting that contractors operated on the payroll.

As a result, and in its Growth Plan, the government announced that it was going to repeal those IR35 reforms. This was welcome news for many, however, as part of Jeremy Hunt’s epic U-turn on the many elements of the mini-budget, it has since been announced that the plans to scrap the off-payroll rules from April 2023 would no longer be going ahead.

That means that for now, nothing changes and therefore it will remain the responsibility of the business engaging the contractor (the end client) to determine the correct tax status of the engagement and if appropriate, pay the necessary tax and National Insurance.

The message for now is carry on as usual with us all hoping for clarity and stability in 2023.

Please contact our Employment team for support on either of these topics.

(November 2022)