From Tuesday 6 April 2021, organisations in the private sector that engage 'off-payroll' workers will become responsible for determining their employment status and paying Income Tax and NICs for those who are deemed to be employees.
The government has published new guidance to help organisations comply with the new rules. This makes it clear that employers must assess a contractor’s employment status for tax purposes and pay any tax due. Those that don't may have to pay financial penalties which in serious cases can be up to 100% of the tax due.
However, HMRC have said it will operate a 'grace period' until April 2022 and won't impose penalties for businesses who make genuine mistakes: 'You will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months of the operation of the new rules, unless there’s evidence of deliberate non-compliance.'
HMRC aim to support businesses and will only intervene if they suspect they are not complying with the rules. If you're doing the right thing (as they put it) they will help you to comply with the rules and to correct mistakes. You'll also have to pay any tax due.
But, any organisation that deliberately ignores the rules will be treated as a 'deliberate defaulter' and will be fined. They can also be named and shamed in a public register to 'encourage them to put their tax affairs in order'.
HMRC also say that they will conduct risk assessments to identify and target businesses in sectors that are most likely to apply the new rules incorrectly.
We can help
We've provided eight tips to help you prepare for IR35 which you can read here.
We are able to offer a competitive fixed fee for an IR35 team (comprising both an employment lawyer and tax lawyer) to:
- Review an individual’s working practices and provide a traffic light report showing where there are risks and whether the engagement falls inside or outside of IR35
- Review your contracts (or prepare one if you have none in place), and suggest amendments or further clauses to protect your position
- Prepare a status determination statement and information to be sent to the worker and any intermediaries
- Provide an appeal service in the event that a worker appeals against your status determination
- Provide training on IR35