Changes to the IR35 system were introduced in April 2021 making contractors responsible for determining the employment status of freelance workers.
The move was roundly criticised by former self-employed workers who saw their tax bills rise and contractors who faced bigger bills from direct employment.
From April 2023 the system will revert back to its original rules with freelance workers assessing their own tax.
Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed said: “The reforms created unnecessary complexity for contractors and businesses. It is with huge relief that we welcome this dramatic shift in government thinking
“As delighted as we are with the news, we remain concerned that the underlying IR35 rules will stay in place, and we hope to work with the government to make further progress on this issue in the weeks and months ahead.
“But for now, this is a watershed moment and will be a tremendous boost to thousands of contractors who have been unfairly penalised by these damaging rules.”