New IR35 legislation changes will come into effect on April 6th 2021, putting the responsibility for assessing off-payroll workers on the end hirer. Being confident that you understand the changes and are prepared for them is vital, as the consequences of getting it wrong can be stressful and far reaching.
Here are some of the long term impacts of making mistakes with IR35:
SCRUTINY BY HMRC
HMRC is going to be keeping a close eye on how the new IR35 regulations are enacted and end hirers without a solid process are likely to find themselves under scrutiny. It’s not enough to tackle Status Determination Statements (SDSs) once and believe you’ve met the requirements. IR35 must be an ongoing procedure that never falls behind. Companies that were ahead of the game and prepared for the initial proposed implementation of IR35 last April must ensure all SDSs have been updated to reflect any subsequent changes.
LIABILITY FOR UNPAID TAX AND SUBSTANTIAL FINES
When determinations have not been made correctly, HMRC will be able to demand unpaid National Insurance contributions (NICs) and taxes, as well as interest and penalties. With the new changes, the responsibility for this sits with the end hirer. HMRC can backdate these payments for up to six years, which could add up to a significant bill in the long term. Anything prior to April 6th this year, the contractor will be liable for.
Contractors will be looking to work with end clients who know what they’re doing when it comes to IR35. Having a reputation as a hirer that understands the system, works with experts to get it right and achieves spot-on assessments will help to attract the top talent. As IR35 determinations will have a big impact on the amount of tax contractors pay, you want to be known as a hirer with robust processes in place.
EMPLOYMENT TRIBUNALS AND INFORMAL CHALLENGES
While it’s important to be able to prove to HMRC that reasonable care was taken in making IR35 determinations, this approach has wider implications. Any hirer trying to cut corners could find themselves having to dedicate more resources to the situation. Contractors who don’t feel contracts have been properly categorised are likely to make challenges in either an informal capacity or go forward with tribunals, which is not ideal for any of the parties involved.
Need an IR35 expert to guide you through the process and keep you on track post April 2020? Get in touch with Brookson Legal.