If IR35 is replaced, what happens to your existing off-payroll records?

News · End-hirers, recruitment agencies and public sector buyers · OPRaaS Platform

The Conservatives have pledged to replace IR35 rather than reform it. If that pledge eventually produces an IR35 replacement, the rules governing off-payroll working could look very different.

But changing the rules would not erase the decisions organisations have already made under them.

For end-hirers, recruitment agencies and public sector buyers, that is the more immediate governance question: if the off-payroll regime changes, can you still evidence why a worker was classified in a particular way, when that decision was made and what working practices supported it?

The importance of that record is already clear. The National Audit Office found that the 2020-21 financial statements of government departments and agencies included £263 million paid, owed or expected to be owed to HMRC following incorrect administration of the IR35 reforms.

The rules may change. The evidence of how they were applied while they were in force does not simply disappear.

What has actually been proposed as an IR35 replacement?

Shadow chancellor Andrew Griffith has said that a future Conservative government would replace IR35 rather than reform or review it.

Reporting by ContractorUK says Griffith has appointed Craig Mackinlay and Robert Colvile as advisers, with their work expected to help shape a proposed replacement.

At this stage, however, there is no IR35 replacement legislation and no settled new system.

Industry commentary has suggested several possible models for an IR35 replacement, ranging from returning responsibility towards the contractor’s intermediary, to a simplified version of the existing off-payroll regime, or creating a substantially different test for genuine self-employment.

Those are possibilities, not yet policy.

For organisations using contingent labour, the important distinction is between what might change in the future and what must still be evidenced from the past.

What an IR35 replacement could actually change, and what it could not

The term “IR35” is often used to describe several related rules, which can make discussion about replacing it confusing.

The original intermediaries legislation is contained in Chapter 8 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003.

The later off-payroll working reforms are principally contained in Chapter 10. They moved responsibility for determining employment status for tax purposes to the client in the public sector from 2017 and, subject to the relevant rules, to medium and large private and voluntary sector clients from 2021.

Under the current regime, the client may therefore need to determine whether the worker would have been an employee for tax purposes if engaged directly and communicate that determination through a Status Determination Statement.

A future government could substantially amend or replace that system.

What it cannot do is change the fact that organisations made decisions under the law that applied at the time.

An IR35 status decision leaves a record that outlasts the rules

A status determination should be more than an “inside” or “outside” conclusion.

There should be evidence showing:

• who was engaged;
• the contractual arrangement;
• the employment status determined at the time;
• the reasons supporting that determination;
• the working practices on which it was based;
• when the decision was made;
• when it was reviewed; and
• what changed if a later determination produced a different result.

That distinction matters because HMRC can examine historic tax periods after an engagement has ended.

The National Audit Office’s £263 million finding illustrates the potential consequence. The issue was not simply disagreement with government policy. HMRC concluded that public bodies had failed to administer the rules correctly and had not taken reasonable care to prevent errors.

A determination that cannot later be supported by its reasoning and evidence is a much weaker governance record.

Replacing the off-payroll rules would not remove wider supply chain responsibilities

This is also where IR35 needs to be separated from the wider regulation of contingent labour.

New umbrella company provisions introduced by Finance Act 2026 insert Chapter 11 into Part 2 of ITEPA 2003, with effect for payments made on or after 6 April 2026.

These provisions establish joint and several liability in qualifying umbrella company arrangements. This is the umbrella-market regime, distinct from HMRC’s older powers to transfer PAYE debts under the PAYE Regulations. In practical terms, the tax risk surrounding a labour supply chain now extends beyond the question of whether an individual falls inside or outside the off-payroll working rules.

Chapter 10 and Chapter 11 address different risks.

• Chapter 10: how the off-payroll employment status rules apply to an engagement.
• Chapter 11: liability where PAYE obligations connected with qualifying umbrella company arrangements are not met.

An IR35 replacement could remove the former without automatically removing the latter.

HMRC is already asking businesses to think beyond a single compliance check

HMRC’s Guidelines for Compliance GfC12 on labour supply chain assurance make the wider direction clear.

The guidance asks businesses to understand the organisations and workers within their labour supply chains, assess the risks they create and consider whether their assurance processes need strengthening.

HMRC specifically says that larger businesses should decide how they will assure themselves of the ongoing integrity of their labour supply chains.

That word matters: ongoing.

A status assessment made when a contractor starts is useful. It is not the same thing as being able to demonstrate, months or years later, who was engaged, through whom, under what status, on what evidence and whether anything subsequently changed.

A tax test can be replaced. The evidence of who employed whom, how they were engaged and why they were classified that way keeps its own timetable.

What should organisations be able to evidence now?

Module 3 of the OPRaaS LSCA Self-Certification Course addresses this in its Contingent Workforce Tracking topic.

Three questions remain relevant whatever form an IR35 replacement ultimately takes:

1. Classification: Can you identify how every contingent worker is engaged and whether that classification is correct?
2. Evidence: Can you produce the documentation supporting that classification?
3. Visibility: Can you produce an accurate contingent workforce report when it is requested, rather than having to reconstruct one?

Those questions do not depend on the current tax regime retaining its present name or structure.

How the OPRaaS Virtual Compliance Director helps maintain the record

OPRaaS, On-Pay-Roll-as-a-Service, is a systemised governance and workforce management partner for organisations that rely on temporary, contractor and contingent labour.

Through the OPRaaS Virtual Compliance Director (OPRaaS VCD), organisations can maintain the evidence behind workforce and supply chain decisions rather than treating compliance as a one-off onboarding exercise.

For off-payroll status, that means maintaining a record of the determination, its reasoning, the relevant working practices and when it should next be reviewed.

Reviews can then be triggered by events such as contract renewal, changes to a role or changes in working practices, rather than waiting until somebody asks for historic evidence.

The wider supplier record can sit alongside that workforce evidence, helping organisations maintain visibility across their contingent labour supply chain.

The objective is straightforward: when a board, auditor, client or regulator asks why a decision was made, the evidence already exists.

Three things to check before any IR35 replacement takes effect

The Conservative announcement remains a political commitment rather than legislation. Any replacement would need to be developed and, if the Conservatives were in government, taken through the appropriate legislative process.

Organisations therefore do not need to redesign their processes around a system that does not yet exist.

They can, however, make sure the evidence supporting the current system is in order.

1. Can you produce your current status determinations?
   Can each decision be produced with its reasoning, supporting evidence and date?
2. Are those determinations still current?
   Have they been reviewed where contracts, roles or actual working practices have changed?
3. Can you see the whole engagement?
   Do you know who supplied the worker, how they are engaged and which organisation is responsible for paying them?

If the off-payroll rules are eventually replaced, the precise status test may change.

The need to understand your workforce and evidence the decisions made about it will not disappear with the name IR35.

That is why labour supply chain assurance should be treated as an ongoing governance process rather than a response to one piece of legislation.

Compliance is your asset. Evidenced daily.

Read next

“Employment status is a supply chain control, not a one-off decision.“

Drawing on reporting by Simon Moore and Josh Toovey in ContractorUK, the National Audit Office investigation into the implementation of IR35 tax reforms, HMRC Guidelines for Compliance GfC12, Finance Act 2026 and Module 3 of the OPRaaS LSCA Self-Certification Course.